Insurance: The Risk Factor
Under Section 64VA of Insurance Act, 1938, every insurer will have to maintain an excess of the value of assets over the amount of liabilities of not less than an amount prescribed by Irda. The Irda annual report for 2011-12 underlines that one of the important factors that influences insurance penetration is the capital requirement under the solvency margin. Emphasising that since pure term products provide simple life cover, companies should design products, which could reach various segments of the population in meeting their insurance needs and enhance insurance penetration. In line with this objective, the regulator had decided to allow the life insurers to reduce the capital requirement in the case of pure-term products without changing the factors loading in the case of the remaining products.
Typically, for an insurance company assets are fixed and investment assets, whereas liability is future payouts
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