Leading international consultant Watson Wyatt has said that it would take three to five years to introduce Risk Based Capital (RBC) System in India. In RBC, the capital requirement of a general insurance company is evaluated in terms of risks rather than prescribed as one single figure for all the companies. In India, regulatory capital requirement for a general insurance company is pegged at Rs 100 crore.
Some of the Asian markets which have adopted RBC are Singapore and Taiwan and Malaysia is currently implementing the system.
According Verna Baker, head of general insurance consulting, Watson Waytt, Asia Pacific Australian RBC system is followed by other major markets including Singapore and Malaysia. In these countries in simple terms capital is allocated according to the lines of business written and according to the asset mix of investment portfolio.
Higher capital is required for more volatile classes( liability, marine hull) and for more volatile investments(property and shares). Explicit capital allowance is made for the quality of the general insurer?s reinsurers and for impaired assets.
Verna said that in India the four public sector general insurance companies have lost 35% of market share too fast to the private sector general insurance companies .
?In China the foreign companies have only cornered 1% of the market share thus far,??
In India the general insurance companies are yet to use their capital efficiently, he said.
?Particularly the state owned insurance companies are yet have sophisticated pricing system in place to minimise their underwriting losses,?? he said.