The insurance companies have urged the Insurance Regulatory and Development Authority (Irda) to allow them to move towards fixing a risk based solvency ratio rather than maintaining an adhoc 150% which is the prescribed formula at present. A formal proposal on the issue would soon be sent to the regulator.

It is understood that the model of fixing risk based solvency ratio for companies is mostly followed in the developed markets.

The move, industry experts said, would help in unlocking a chunk of capital which can be otherwise utilised for expansion and growth. This would also mean that the solvency ratio would vary depending on the risk exposure of each company which in turn would be assessed by actuaries. However, this would need an amendment of the Insurance Act. The Bill aimed at bringing a comprehensive amendment in the Insurance Act is pending in Parliament.

It is understood that the government is yet to strike a consensus with the Left parties on the tricky issue of raising the foreign direct investment level from the current 26% to 49%.

Sources said that the bill is unlikely to be taken up during the forthcoming Parliament session.

The Left parties have reiterated that they would not support a hike in the FDI level. The uncertainty has become a cause of concern for the insurance companies.

Sources within the industry said that the insurance business is capital intensive and fresh capital would required for further expansion and even to break even.

However, the life insurance industry has something to cheer about.

In 2006-07, the sector registered an over 100% growth with the total collection of first year premium, including individual, group and single, touching Rs 76,406 crore. Of this amount, Life Insurance Corporation (LIC)’s first year premium stood at Rs 55,935 crore, a growth of 91% over the previous year.

Among the private players, ICICI Prudential, Bajaj Allianz Life Insurance, SBI Life, HDFC Standard Life, Max New York Life and Aviva Life Insurance top the list.

ICICI Prudential collected Rs 5,254 crore in 2006-07 as first year premium .