New IRDA norms on the anvil?

By Priyal Guliani, CNBC-TV18

There could be some bad news coming in for insurance companies. 'Mark shareholders investments to market' is what the IRDA is expected to tell insurance companies. This could mean a 20-30% hit to insurance company's balance sheets.

Ashwin Parekh of Ernst & Young said, "If we have 15 insurance companies that are active and have sizeable policy holder book or underwritten business and if you look at average capital of say Rs 2,000 crore, we are looking at a total capital of Rs 30,000-32000 crore. In the life insurance portfolio, if we take a loss of 20 -25%, we are looking at Rs 6,000- 7,500 crore lost, gone on account of this particular mark-to-market factor."

IRDA's expected norms

• Insurers must mark-to-market their investments from shareholders fund
• Insurers to take Rs 6000 crore hit
• Investments represent solvency margins
• Insurers to maintain 150% solvency margins
• Balance sheet loss for insurers between 20-30%

Shareholders Funds    (%)

Equity                           15 
G-secs                          50
Corp. Bonds                  23
Derivatives                      3