Mumbai: The Insurance Regulatory and Development Authority of India's (Irdai) plan to roll out a risk-based capital (RBC) framework from April 2027 is running into industry concerns, with insurers expressing concern that capital constraints, technology upgrades and a shortage of skilled manpower could make the timeline difficult to meet.
Currently, Indian insurers follow a solvency-based capital framework in which capital requirements are determined using standard factors and each insurer's solvency level.
Under risk-based capital (RBC), assets and liabilities would be valued on a market-consistent basis. It requires insurers to hold capital proportional to their specific risk profile, rather than a regulatory minimum.
This will boost insurers’ financial strength and their ability to pay claims, even during severe economic conditions or unexpected disasters. It also serves as an early warning signal for regulators to monitor and assess undercapitalized insurers and take action before they default on claims or become insolvent.
"The solvency requirement would be aligned with the risks actually present on an insurer's balance sheet, rather than a one-size-fits-all factor," said Rahul Khandelwal, partner, financial services, actuarial practice, at EY India.
Under the current regime, Indian insurers are required to maintain a solvency ratio of at least 1.5 (150%), meaning their assets must be 1.5 times their liabilities.
A delayed RBC rollout keeps insurers under less risk-sensitive rules, delaying transparency for policyholders and investors, while slower alignment with global standards could also dampen India’s appeal to foreign investors.
“You are moving to a capital regime that is more risk-oriented, so companies will have to manage capital more dynamically,” Khandelwal said, adding that from reporting and systems to processes, a lot will change. “Companies will have to rethink their product strategy and their capital strategy. It’s a significant change across the organisation.”
The main challenge is the varying levels of preparedness across the industry. This is reflected in the adoption so far of the Ind-AS 17 accounting standard, which is being touted as the initial step towards the risk-based transition.
The regulator implemented the Ind-AS accounting standard from April 2026 but gave insurers a one-year forbearance to comply with the norms while also asking them to declare their accounts in a dual format for two years.
Irdai chief Ajay Seth, in a television interview last month, spoke about the April 2027 deadline and said 11 insurers have already adopted the framework, while others have opted for regulatory forbearance. India's insurance market currently comprises 74 registered insurers – 26 life insurers, 48 non-life insurers.
"It will take some time. The Ind-AS adoption will help with a chunk of the accounting shift. But even then, RBC (risk-based framework) adoption has a lot of other aspects, including stress tests and realignment of some processes, all of which will require time," said a senior official at a mid-sized private insurer.
The rollout of the RBC regime is dependent on the progress of the Ind-AS implementation, making it unlikely that the RBC framework can be rolled out as soon as April. Even if it is, the regulator is expected to detail a glidepath for insurers to comply with the norms, indicating that complete adoption or transition will take some more time.
“RBC implementation may be slightly more complex and timelines may be challenging. When you look at two reporting frameworks changing within a short period, it does mean a significant amount of work for everyone involved," said EY India’s Khandelwal. “RBC will require insurers to run different stresses and scenarios to determine capital requirements. It could also affect decisions beyond regulatory reporting.”
Simultaneous or back-to-back implementation and adoption of two significant changes also pose challenges for insurers, including high compliance and operational costs, raising concerns about the impact on growth during this period of transition.
While the current regime is “relatively straightforward and formula-based”, the RBC framework is much more intensive and requires significant information to assess the risks an insurer carries, the capital required to support those risks, and the capital available with the company, said Hari Radhakrishnan, regional director, First Policy Insurance Brokers and former head of underwriting (commercial lines) at HDFC ERGO General Insurance.
In a post-earnings analyst call on 15 July, HDFC Bank-promoted HDFC Life Insurance’s chief financial officer, Niraj Shah, said that while implementation of the new accounting standard is on track, the transition to RBC could take another 15-18 months. So far, this is the only insurer that has given a timeline.
Manpower gap
Given the scale of changes required, a challenge is also the lack of skilled manpower needed by the insurance sector to implement the new norms. Irdai chairman Seth, at the 25th Global Conference of Actuaries on 24 February, said India needs a significantly larger pool of qualified actuaries in light of the transition to RBC norms and to converge with international financial reporting standards.
Highlighting the acute shortage of actuarial professionals or those assessing risks, he said India has fewer than one actuary per million people, compared with more than 40 per million in the US and over 250 per million in the UK. The total membership of the Institute of Actuaries of India declined to nearly 9,700 in 2025 from around 12,000 in 2011.
Life insurers, especially those with foreign partners, may have an advantage, as their parent companies already operate under Solvency II or similar frameworks and may have the required infrastructure, expertise, and technological know-how backed by their foreign promoter.
On the non-life side, PSU general insurers are keen to shift to the RBC framework because they believe it will help them report better solvency due to better valuation of their legacy investments, Mint had reported on 10 July. But, revaluation of assets and liabilities is not the only criteria and legacy PSU insurers may actually face more challenges during the transition, experts said.
“Other markets have also taken considerable time to implement such regimes. Indian insurers are at different stages of maturity. Some are newly established, while others are older, legacy companies. Bringing all of them along in the transition is a challenge,” Radhakrishnan said, adding that older companies still grapple with a lot of unorganized data, whereas newer companies are still in the process of developing their systems and processes.
“There are different issues that need to be addressed,” Radhakrishnan said, adding that older companies still grapple with a lot of unorganized, whereas newer companies are still in the process of developing their systems and processes. “There are different issues that need to be addressed.”
Soft pricing in commercial insurance, rising claims costs and legacy issues could complicate the transition for some general insurers, a senior industry official said on the condition of anonymity.
“The impact will vary depending on insurers' balance sheets and risk profiles,” he said, adding that market-consistent valuation could increase the value of some assets, while higher risk-based charges could increase capital requirements elsewhere.
“The level of preparedness varies by insurers. Typically, it would depend on the maturity of their risk function,” said Mona Mathur, whole-time director and chief financial officer of Shriram General Insurance, citing the example of capital charge under RBC based on the riskiness of investments made.
“Insurers who currently aim to maximise returns irrespective of the level of risk are likely to feel more stressed,” Mathur said.