IRDAI Approves Risk Based Capital Framework for Insurers

The IRDAI, during its 133rd Authority Meeting held on 23 December 2025 in Hyderabad, reviewed the performance of India’s insurance sector and approved several major regulatory initiatives. The Authority noted that total industry premium collections reached ₹8.02 lakh crore up to November 2025, with life insurance contributing ₹5.80 lakh crore and health insurance emerging as the largest segment within general insurance. Key reforms discussed included implementation of a Risk Based Capital (RBC) framework, introduction of Ind AS accounting standards for insurers, and review of conflict-of-interest norms based on SEBI’s high-level committee recommendations. The Authority also approved creation of a Chief Vigilance Officer post at Executive Director level. IRDAI highlighted concerns over rising underwriting losses, increasing claims inflation, higher surrender rates in life insurance, growing dependence on reinsurance, and elevated commission costs. The meeting emphasized stronger regulatory oversight, improved transparency, enhanced policyholder protection, and long-term sector stability through modernization and governance reforms.

Insurance Regulatory and Development Authority of India

MINUTES OF THE 133^rd
MEETING OF THE AUTHORITY
held on 23^rd December 2025 at 11 am at Hyderabad

1. Members extended a warm welcome to the Chairman, who presided over his first Meeting of the Authority, after assuming charge on 1^stSeptember 2025.

2. The Chairman extended greetings to all members. He welcomed Smt. Shalini Pandit, JS, DFS, who has been nominated as Part-time Member of the Authority vide notification dated 3^rdDecember 2025. He placed on record contributions of Dr. Parshant Kumar Goyal, who was Part-time Member till that day.

3. Leave of absence was granted to Shri Satyajit Tripathy, Member (Distribution) who could not join the meeting for personal reasons.

4. After ascertaining that the requisite quorum was present, Chairman started the deliberations.

5. In his opening remarks the Chairman briefly touched upon performance of the Industry where he observed that the premium growth has moderated sharply into single digits, lagging nominal GDP growth, indicating normalization after the post-COVID surge. Strong growth rate in the Individual business has signaled renewed momentum in performance of the Life insurance business. As regards industry’s performance upto November 2025, while the performance was subdued till August 2025, one of the reasons being impact of the revisions in the accounting methodology in General insurance segment, growth of the sector has been more than the growth of the economy as a whole. At the Industry level, the premium garnered was ₹8.02 lakh crore with a growth rate of 9.86%. Life Insurance business which continues to dominate the market, accounting for around 80% of total premium income upto November 2025 registering a total premium of ₹5.80 lakh crore (growth over previous year is 10.48%) while the General Insurers collected a gross direct premium of ₹2.22 lakh crore (growth over previous year is 8.29%). In the Health insurance segment, premium collected up to the month of November 2025 is ₹0.88 lakh crore as against ₹0.79 lakh crore upto November 2024 with a growth rate of 11.39%. A structural shift is evident, with Health insurance becoming the largest line at ~41% of General Insurance premiums, overtaking motor. The premium collected by stand-alone Health Insurance companies upto November 2025 is ₹ 0.26 lakh crore as against ₹ 0.23 lakh crore upto November 2024 with a growth rate of 13.04%.

6. The AUM of the industry as on 30^thSeptember 2025 was about ₹ 78.48 lakh crore as compared to ₹ 72.08 lakh crore previous year. Investments are largely conservative, with ~59% in government securities and ~30% in approved investments, ensuring stability and liquidity.

7. Total benefits paid by Life Insurers increased sharply from about ₹4 lakh crore in FY2021 to ₹6.3 lakh crore in FY2025, with payouts rising ~27% over the last two years after post-pandemic normalization. Non-Life net incurred claims increased from ~₹1.1 lakh crore in FY2021 to ~₹1.9 lakh crore in FY2025, a rise of over 70%. The steady upward trend reflects structurally embedded claims inflation from rising medical and motor repair costs. Health and Motor dominate claims (~85%), with Health at ~45–48% and Motor at ~40%. Commercial lines contribute minimally (<6%) due to high reinsurance, making sector profitability highly sensitive to health care inflation and motor claims trends.

8. This calendar year witnessed GST exemption for individual life and health insurance policies which resulted in reduction of total cost premiums and making insurance more affordable to policyholders. Another major initiative having a bearing on the sector is enactment of the Sabka Bima Sabki Raksha (Amendments to Insurance Laws), Act, 2025 to introduce forward looking reforms that aim at deepening insurance coverage, provide ease of doing business and improve regulatory oversight and governance, capital augmentation, adoption of advanced technology and global best practices in insurance sector. We have to work towards achieving the intent of the Parliament for the insurance ecosystem which is clearly depicted in the statement of objects and reasons as under:

a. to further accelerate the growth and development of the insurance sector;

b. to ensure better protection of policyholders;

c. to improve ease of doing business for insurance companies, intermediaries and other stakeholders;

d. to bring transparency in regulation making and to improve regulatory oversight over the sector;

9. The FDI inflow in connection with the insurance companies as on 30^thSeptember 2025 was ₹ 84,307 crore of which FDI inflow in the current financial year till December 2025 is about ₹ 545 crore.

10. The Paid-up Capital as on 30^thSeptember 2025 is around ₹0.85 lakh crore as compared to ₹0.83 lakh crore as on 31st March 2025.

11. As regards major activities undertaken by the Regulator, there are about 8 applications in R1 stage of the Registration process and one application at R2 stage. 6 out of 8 applications in R1 stage have been received within last 2-4 months and are under examination. Two applications at R1 stage which have been received beyond a year. Owing to certain regulatory concerns, these applications are under thorough examination. One applicant has obtained NOC from IRDAI to commence the process of registering as an insurer. Further, about 7 applications requesting for approval of transfer of shareholding of Non-Life Insurers and 5 applications of Life Insurers have been approved in this financial year till date.

The Authority noted the update.

The agenda items were then taken up for consideration.

2. Circular Agenda Note on Annual Report 2024-25

2.1 It was presented that a circular agenda note on IRDAI Annual Report 2024-25 was circulated on 23^rd October 2025 seeking approval. All Members of the Authority had consented to the said circular resolution. It was further submitted that the IRDAI Annual Report 2024-25 was placed before both the Houses of Parliament in December 2025.

2.2 The Authority noted the circular agenda item and the resolution adopted thereon. Further, the Authority advised to aim at having more informative report for public information and to place the IRDAI Annual Report in monsoon session of the Parliament.

10. Creation of post of Chief Vigilance Officer (CVO) in IRDAI, in the cadre of ‘Executive Director’.

10.1 CGM (GA & HR) presented that DFS in consultation with CVC has assigned the additional charge of CVO, IRDAI to the CVO of Canara Bank. He took charge as CVO, IRDAI w.e.f. 22^nd September 2025 with a tenure of six months or till further orders by DFS whichever is earlier. Present position of the CVO in Canara Bank is in Executive Director (ED) Grade

10.2 It was submitted that as per the provisions in the Vigilance Manual as relevant to IRDAI, one additional post in the cadre of ED as Chief Vigilance Officer may be created.

10.3 After deliberations, the Authority approved the creation of the post of CVO at the level of ‘Executive Director’, and decided to request the government to continue the current arrangement of posting a CVO from another financial/regulatory agency on additional charge basis.

11. Implementation of Risk Based Capital (RBC) Framework in India

11.1 GM (Actuarial) presented that the current capital requirements are not fully risk-based and do not fully meet ICP standards on Capital Adequacy. The Financial Sector Assessment Program (FSAP) conducted by IMF and World Bank in the year 2024 has also recommended moving towards a risk based solvency assessment. Further, steps taken towards implementation of Risk Based Capital (RBC) framework in India, through a consultative approach after examining risk based solvency frameworks in other jurisdictions were presented.

11.2 It was further presented that the initial Quantitative Impact Study (QIS1) was carried out in the year 2023. Based on the feedback and analysis of the submissions, the framework has been revised and the second Quantitative Impact Study (QIS2) was carried out in August 2025. The results of initial analysis of the QIS 2 and issues to be addressed were presented. The Technical Guidance Document used for conducting QIS 2 was tabled during the meeting.

11.3 After deliberations, the Authority approved drafting and publishing the draft regulations on Indian Risk Based Capital Framework for stakeholder consultation.

13. Implementation of Ind AS in Insurance Sector in India

13.1 CGM (F&I) presented the decision of the Authority in the 112^th Authority Meeting held on 17^th March 2021 to implement Ind AS in Indian Insurance sector two years after global implementation of the equivalent standard i.e., IFRS 17 subject to prior implementation of Ind AS in the banking sector.

13.2 In the 116^th Authority meeting held on 22^nd December 2021, it was decided that the implementation may be held back till such time clarity emerges on the implementation of Ind AS in banking sector.

13.3 It was further presented that IFRS 17 is effective globally from 1 Jan 2023. Ind AS 117 (equivalent of IFRS 17) was notified on 12^th August 2024 which is effective from 1^st April 2024. In terms of Rule 5 of the Companies (Indian Accounting Standards) (Amendment) Rules, 2016, insurers shall apply Ind AS, as notified by IRDAI. RBI has not yet notified the timelines for implementation of Ind AS for banks. However, it has taken steps towards the adoption of the Expected Credit Loss (ECL) based on impairment framework aligned with Ind AS 109.

13.4 Steps taken towards implementation of Ind AS in Indian insurance sector, in terms of gap assessment carried out by insurers, submission of proforma financial statement and impact study carried out, key considerations arising out of the impact study were presented. It was submitted that there is a need for further consultations with stakeholders to finalize implementation date.

13.5 After deliberations, the Authority authorized the Chairperson to decide on:

1. Timeline and manner of implementation

2. Issuance of consultation paper with draft regulations for implementation of Ind AS in Insurance Sector in India.

16. Report of the High-level Committee on Conflict of Interest, Disclosures and Related Matters in Respect of Members and Officials of the Securities and Exchange Board of India

16.1 Report of the High-level Committee on Conflict of Interest, Disclosures and related matters in respect of Members and Officials of the Securities and Exchange Board of India (SEBI) has been published on 12^th November 2025 (the Report). There were deliberations about the Report and discussions held by SEBI in their recent Board Meeting.

16.2 It was discussed that the Report presents a comprehensive assessment of the adequacy of SEBI’s framework regarding conflict of interest and disclosure of interests. It proposes reforms aimed at enhancing transparency, accountability, and ethical standards in respect of Members and Officials of SEBI.

16.3 The following views emerged:

• exploring the possibility of adopting the recommendations in the Report with respect to Members and Officials of IRDAI, with or without modifications
• considering the report as a base document, customisation as relevant with respect to the stakeholders of the insurance sector may be evaluated

16.4 After deliberations, the Authority approved the proposal to carry out review of applicability of the recommendations of the Report vis-à-vis the extant provisions in the following Rules/Regulations and issue an exposure draft for stakeholder consultations:

• IRDA (Salary and Allowances Payable to, and Other Terms and Conditions of Service of Chairperson and Other Members) Rules, 2000
• IRDAI Staff (Officers and Other Employees) Regulations, 2016

Closing Remarks

In his closing remarks Chairman discussed some of aspects of performance of the insurers requiring regulatory attention and necessary interventions, as under:

• Non-life insurers continue to face weak core profitability, with persistent underwriting losses across segments, most pronounced among PSUs. Investment income remains the key stabilizer, offsetting underwriting losses, but creates vulnerability to market and interest-rate cycles.
• Rising surrenders in life insurance sector pose risks to asset-liability management (ALM), as premature exits can force early asset liquidation, reduce long-term investible funds, and signal policyholder dissatisfaction or competitive pressures from other financial products
• The sharp rise in commissions highlights a structurally high-cost industry, with growth still reliant on expensive intermediary-driven distribution rather than any cost-saving digital transformation. High front-loaded acquisition costs erode policyholder value in long-term products, leaving low asset build-up in early years and minimal surrender value on early exit. This cost structure undermines trust and persistency, as early exits effectively wipe out the policyholder’s principal while weakening the sector’s overall value proposition.
• In Non-Life Insurance sector, persistent rise in complaints signals systemic service issues. Health and motor claims are key drivers, highlighting growing policyholder friction and the need for targeted corrective action.
• Significant increase in reinsurance ceded by General and Health Insurers reflects growing risk transfer needs. The rising dependence on cross-border reinsurance indicates capacity constraints in the domestic market and increases exposure to global pricing cycles. Growing outward premium flows also imply foreign exchange outgo, highlighting the need to strengthen domestic reinsurance capacity, including through IFSC Insurance Offices (IIOs), to retain premiums and enhance sector resilience.

The Chairman indicated that there is a need to review the performance of the industry on a periodic basis for policy / regulatory interventions as may be necessary. Accordingly, he suggested that a review of performance of industry/specific segments/specific parameters requiring the attention of the Authority may be presented in the next Authority meeting.