RBC framework: IRDAI asks insurers to conduct a second impact study

IRDAI has been working on implementing the RBC framework to replace the current present fixed-solvency margin system.
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The Insurance Regulatory and Development Authority of India (IRDAI) has directed insurance companies to undertake a Quantitative Impact Study (QIS) to implement risk based capital (RBC) regulatory framework for the Indian insurance industry.

IRDAI has been working on implementing the RBC framework to replace the current fixed-solvency margin system in a bid to align the domestic industry with global standards with a risk-sensitive approach. 

“Risk-based solvency in insurance would allow insurers to hold capital proportionate to the risks they undertake to facilitate financial stability and protection of policyholders’ interests. It would focus on the specific risks an insurer faces, such as investment, underwriting, operational, and market risks. It will be good for further globalisation of the Indian insurance industry,’‘ MD and CEO of a private life insurance company told businessline. 

“Development and implementation of the RBC framework is one of the key initiatives being undertaken by IRDAI, among others, to align the Indian insurance industry with global best practices,’‘ IRDAI said in a communication to insurers. 

Word of caution

IRDAI had conducted the first quantitative impact study (QIS 1) to assess the RBC framework’s initial impact in 2023.

Based on the insights gained and suggestions received from insurers, a second quantitative impact study (QIS 2) was considered necessary to further improve the framework. 

The regulator asked insurers to carry out QIS 2 as per the technical guidance document, with the data used for actuarial valuation as at March 31, 2025, which have been sent to the insurers individually. 

According to a senior actuary of a listed general insurance company, the direction to conduct a second QIS by IRDAI would mean further caution in rolling out the new framework. “Even though it was expected to be rolled out this year, we now can expect it to be introduced some time next year,’‘ he said.

The latest report on the Financial Sector Assessment Program (FSAP), a joint programme of the International Monetary Fund (IMF) and the World Bank (WB), has acknowledged transition plans towards a risk-based approach in the insurance sector as an indication of “India’s commitment to global best practices and a resilient insurance sector.’‘

Published on August 18, 2025

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