Domestic Systemically Important Insurers (D-SIIs)

Why in news?

• The Insurance Regulatory and Development Authority of India (IRDAI) has identified the Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC) and The New India Assurance Co. as Domestic Systemically Important Insurers (D-SIIs) for 2020-21.

About D-SIIs:

• D-SIIs refer to insurers of such size, market importance and domestic and global interconnectedness whose distress or failure would cause a significant dislocation in the domestic financial system.
• Size in terms of total revenue, including premium underwritten and the value of assets under management are among the parameters on which the insurers are identified.
• IRDAI has said it will list D-SIIs on an annual basis.
• Their continued functioning is critical for the uninterrupted availability of insurance services to the national economy.
• D-SIIs are subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues (like unnecessary risk taking, lack of market discipline, creation of competitive distortions) etc
• Given the nature of operations and their systemic importance, the regulator has asked the three public sector insurers to
  •  raise the level of corporate governance
  • identify all relevant risks and promote a sound risk management culture.

Domestic Systemically Important Banks (D-SIBs):

• In 2015, RBI released a framework for dealing with domestic systemically important banks (D-SIBs). This list is revised annually.
• RBI has followed, more or less, the methodology of BCBS with some modifications to suit domestic conditions-considers size, interconnectedness, substitutability and complexity.
• In 2015, RBI announced State Bank of India (SBI) and ICICI as D-SIBs. Later on, HDFC bank was also added to the list.

PRELIMS QUESTION

Consider the following statements regarding Domestic Systemically Important Insurers (D-SIIs):
1.They are identified by Ministry of Finance.
2.Total revenue is the only criteria used for identifying D-SIIs.
Which of the statements given above is/are correct?
(a)1 only
(b)2 only
(c)Both 1 and 2
(d)Neither 1 nor 2

Answer to prelims question