SOLVENCY RATIO OF LIFE INSURANCE COMPANIES IN INDIA

SOLVENCY RATIO

In India we have many life insurance and general insurance companies. All these companies are bind by rules and regulations as and when described by IRDA. To Maintain solvency ratio is also a main regulation to be followed by all the insurance companies in India.  Solvency ratio is a main factor which enable us to find out the capacity of life insurance companies to survive for long term. This is also a main point to be discussed before choosing a life insurance company in India. Insurance being a risky business and unforeseen events might occur sometimes, it may result in higher claims which was not expected earlier. For example, calamities like the Jharkhand floods, Gujarat earthquake, Tsunami, fire, etc may bring huge number of claims to the insurance company. The solvency of an insurance company refers to its ability to pay claims. The Solvency ratio is a way you can measure the company’s ability to meet its long term obligations. An insurer is insolvent if its assets are not enough or cannot be used of in time to pay the claims arising. It is the extra capital that an insurance company is required to hold at any point of time. As per the IRDA (Assets, Liabilities, and Solvency Margin of Insurers) Rules 2000, both life and general insurance companies need to maintain solvency margins. Life insurance companies are expected to maintain a 150% solvency margin. The higher the ratio, better equipped a company is to pay off its claims and survive in the long term. I had bought you the solvency ration of life insurance companies in India for your reference. You can also refer solvency ratio of general insurance companies in India here.

SOLVENCY RATIO OF LIFE INSURANCE COMPANIES IN INDIA

  COMPANY NAME 2014 2013 2012 2011 2010
1 AEGON RELIGARE LIFE INSURANCE 2.28 1.91 2.62 3.22 2.66
2 AVIVA LIFE INSURANCE 4.15 4.23 5.15 5.4 5.12
3 BAJAJ ALLIANZ LIFE INSURANCE 7.34 6.34 5.15 2.86 2.68
4 BHARATHI AXA LIFE INSURANCE 2.09 1.82 2.34 2.14 1.68
5 BIRLS SUN LIFE INSURANCE 1.86 2.67 2.99 2.89 2.11
6 CANARA HSBC LIFE INSURANCE 3.59 3.84 2.6 3.07 2.58
7 DHFL PRAMERICA LIFE INSURANCE 5.37 2.67 2.31 2.53 1.67
8 EDELWEISS TOKIO LIFE INSURANCE 2.2 1.96 2.41 NA NA
9 EXIDE LIFE INSURANCE 2.39 1.8 2.16 3 1.79
10 FUTURE GENERARLI LIFE INSURANCE 3.18 4.17 3.86 2.21 2.34
11 HDFC STANDARD LIFE INSURANCE 1.94 2.17 1.88 1.72 1.8
12 ICICI PRUDENTIAL LIFE INSURANCE 3.72 3.96 3.71 3.27 2.9
13 IDBI FEDERAL LIFE INSURANCE 4.72 4.9 6.61 6.6 4.05
14 INDIAFIRST LIFE INSURANCE 2.47 4.2 7.71 6.36 5.27
15 KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE 3.02 5.21 3.06 2.67 2.79
16 MAX LIFE INSURANCE 4.85 2.07 5.34 3.65 3.22
17 PNB METLIFE INSURANCE 2.28 2.93 1.65 1.69 1.65
18 RELIANCE LIFE INSURANCE 4.42 4.29 3.53 1.66 1.86
19 SAHARA LIFE INSURANCE 6.84 5.78 5.28 4.82 4.5
20 SBI LIFE INSURANCE 2.28 2.15 5.34 2.04 2.17
21 SHRIRAM LIFE INSURANCE 6.41 5.59 4.99 3.96 2.69
22 STAR UNION DAICHI LIFE INSURANCE 2.38 3.46 5.67 6.7 7.46
23 TATA AIG LIFE INSURANCE 4.09 3.41 2.84 2.16 2.11
24 LIC 1.54 1.54 1.54 1.54 1.54
All the 24 life insurance companies in India are supposed to maintain 1.50 as solvency ratio. Solvency Rationet.assets \div net.premium.written From the above table we can understand that Bajaj Allianz life insurance is having the highest solvency ratio(7.34) in 2014. The only Public sector life insurance company LIC is having a solvency ratio of 1.54 which is slightly more than the required ratio. This is because of the fact that LIC is operating in India from 1956. So a company with lesser solvency ratio may not indicate weaker company profile. But in the other side, A higher solvency ratio indicates strong company profile.  
SOLVENCY RATIO OF LIFE INSURANCE COMPANIES 2018-19

  • Rekha Verma

    I am unable to understand that solvency ratio is 150% of which amount ?

    Way To Insurance Team

    Dear Rekha Verma, Thanks for writing. The solvency ratio is nothing but the percentage of net assets that an life insurance company should have over the net liabilities. Liabilities include maturity claims, death claims and expenses . For example if a company has an liability of Rs.100 in a year, it should maintain an minimum net asset value of Rs.150 Hope your query is answered Thanks

    Hosting

    That is why the solvency ratio is a crucial component to consider when deciding whom to select as an insurer.

    Avani joshi

    Can I have the latest solvency ratio of life insurance companies

    Avani

    Good sharing, but can I know the latest numbers

    Rex

    Can you explain the calculation of the solvency margins wrt assets and liabilities explained in the balance sheet. I couldnt mattch the public disclosures and balance sheet values. Woukd really appreciate the help.

    yogesh

    dear sir, i want to know what is the impact/roal of IRDA in the development of life insurance sector in india.and how it is anaylis

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