Risk-Based Capital for Indian Insurers
Capital matched to each insurer's risks. IRDAI is testing it; the old solvency rule still applies.
Risk-based capital (RBC) means an insurer holds capital in proportion to the risks it actually runs, instead of a fixed formula applied to everyone. IRDAI is building an Indian version, Ind-RBC, but as of November 2026 it is not in force. Indian insurers still work under the factor-based solvency margin regime.
IRDAI has run two quantitative impact studies (QIS), dry runs where insurers compute the proposed capital numbers on real data and report the results. Both circulars say the guidance is for the study only and is not IRDAI's final decision on the framework.
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Today's Solvency Margin vs Risk-Based Capital
Basis
Current regime
Factor-based: Required Solvency Margin (RSM) by a regulator-prescribed method
Risk-based capital
Capital set by quantifying the insurer's own risks
Test
Current regime
Available Solvency Margin (ASM) at least 150% of RSM at all times (the control level)
Risk-based capital
To be set in the final framework; not yet published
Rulebook
Current regime
IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024
Risk-based capital
Ind-RBC framework, under development
Status
Current regime
In force
Risk-based capital
Two impact studies done (2023, 2025); no go-live date published
| Current regime | Risk-based capital | |
|---|---|---|
| Basis | Factor-based: Required Solvency Margin (RSM) by a regulator-prescribed method | Capital set by quantifying the insurer's own risks |
| Test | Available Solvency Margin (ASM) at least 150% of RSM at all times (the control level) | To be set in the final framework; not yet published |
| Rulebook | IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 | Ind-RBC framework, under development |
| Status | In force | Two impact studies done (2023, 2025); no go-live date published |
Key Terms
- Available Solvency Margin (ASM)
- The excess of the value of an insurer's assets over its liabilities.
- Required Solvency Margin (RSM)
- The margin the regulator's method says an insurer must hold. It cannot be less than 50 per cent of the minimum capital under section 6 of the Insurance Act, 1938.
- Solvency ratio
- ASM divided by RSM. IRDAI's control level is 1.50. Crisil describes it as a measure of capital adequacy against an insurer's underwriting risks and growth.
- Quantitative Impact Study (QIS)
- A trial run in which insurers calculate capital under a proposed framework, so the regulator can see the likely effect before making it law.
- Ind-RBC
- IRDAI's name for the Indian Risk Based Capital framework.
Ind-RBC So Far
| Date | Step |
|---|---|
| By August 2023 | IRDAI had set up a dedicated RBC Mission Mode team to rationalise the current capital and solvency requirements |
| 10 August 2023 | QIS 1 technical guidance issued. Insurers to use actuarial valuation data as at 31 March 2023 and submit results by 30 November 2023 |
| 14 August 2025 | QIS 2 circular, after refining the framework on QIS 1 results and insurer feedback. Data as at 31 March 2025; results due by 15 October 2025. IRDAI called it the pivotal step toward the RBC regime |
| Reported in 2024-25 | The IMF's Financial Sector Assessment Program cited IRDAI's transition to risk-based capital and risk-based supervision as a key reform |
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What IRDAI Built It From
Per the QIS 1 circular, the draft framework drew on:
- check_circleThe International Association of Insurance Supervisors' (IAIS) Insurance Capital Standard and Insurance Core Principles.
- check_circleRBC frameworks of other jurisdictions and other public documents.
- check_circleEconomic capital reports submitted by insurers.
- check_circleDiscussions with foreign supervisors and consultation with the Indian insurance industry.
Who It Covers
- check_circleBoth QIS circulars apply to all life insurers, general insurers, standalone health insurers, reinsurers, branches of foreign reinsurers and Lloyd's India.
- check_circleWhile the studies run, insurers keep filing their regulatory returns under the current regime.
- check_circleOn 31 March 2025 every life insurer met the 1.50 control level, according to IRDAI's Annual Report 2024-25.
Exam Traps
RBC is not yet the law in India: the current test is still ASM at least 150% of RSM. A QIS is a study, not a regulation, and IRDAI says the QIS guidance is not its final word. The solvency ratio is ASM divided by RSM, not the other way round.
FAQs
What is risk-based capital in insurance?expand_more
A capital regime where the amount an insurer must hold depends on the risks it carries, rather than on a standard factor applied to every insurer.
Has India moved to risk-based capital?expand_more
Not yet, as of November 2026. IRDAI has run two quantitative impact studies (QIS 1 in 2023, QIS 2 in 2025) but has not notified a final framework or start date. The solvency margin rules still apply.
What is the current solvency requirement for Indian insurers?expand_more
Available Solvency Margin must be at least 150 per cent of Required Solvency Margin at all times, a solvency ratio of 1.50. The method is in IRDAI's Actuarial, Finance and Investment Functions of Insurers Regulations, 2024.
What was QIS 2?expand_more
IRDAI's second quantitative impact study for Ind-RBC, set by its circular of 14 August 2025. Insurers ran it on data as at 31 March 2025 and had to submit results by 15 October 2025.
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