Insurance sector maintains strong solvency ratios, with life insurers at 202% and non-life insurers at 167%, exceeding minimum requirements.
The consolidated solvency ratio of the insurance sector remains above the minimum threshold limit of 150 per cent, according to the latest Financial Stability Report (FSR).
As insurance liabilities are contingent upon future events, a higher solvency ratio implies resilience of the insurers to withstand future uncertainties. This ratio is a measure of insurers capital adequacy.
At 202 per cent, as at June-end 2024, the aggregate solvency ratio for life insurance companies has remained above the prescribed threshold for the industry – public sector (199 per cent) and private sector (210 per cent), per the report.
At 167 per cent, as at June-end 2024, the aggregate solvency ratio for non-life insurance companies has remained above the prescribed threshold for the industry – public sector (31 per cent), private sector (227 per cent), standalone health insurers (208 per cent), specialised insurers (855 per cent).
The solvency ratio for three public sector non-life insurers, however, stood below the baseline prescription, the report said. It remained well above the threshold for rest of the non-life insurer categories.
The solvency ratio of an insurance company assesses its ability to meet its obligations towards policyholders by reflecting the level of its assets over and above its liabilities.
The higher the solvency ratio, the better the ability of the insurer to meet its liabilities. The Insurance Regulatory and Development Authority of India (IRDAI) has set the minimum solvency ratio requirement for insurance companies in India at 150 per cent.
Life insurance: Premium income
The report noted that the premium income for life insurance sector has been consistently increasing aided by rising disposable income, regulatory reforms, promoting ease of doing business and rising awareness on the need of insurance, among other factors.
The total insurance premium collected by life insurers increased to ₹3.99 lakh crore in April – September 2024 from ₹3.51 lakh crore in April–September 2023, registering a growth rate of 13.7 per cent growth (y-o-y).
Similarly, new business premium of life insurance industry grew by 19.5 per cent, reaching ₹1.89 lakh crore in April- September 2024 from ₹1.58 lakh crore vis-à-vis April-September 2023.
Non-life insurance: Premium income
Increased awareness of risk management and the need for financial protection has contributed to significant growth in recent years, with the total premium underwritten by general and health insurers reaching ₹1.54 lakh crore in the current financial year (April-September 2024), exhibiting a 7 per cent growth (y-o-y), per the FSR.
Among various lines of business, the health insurance segment (the largest among the non-life insurance sector) has reported the highest growth of 8.95 per cent.