For brokers and underwriters placing business in India’s market, the question of how much capital an insurer holds against the risks it writes is about to become far more visible – and far more consequential.
The Insurance Regulatory and Development Authority of India (IRDAI) constituted two working groups in November 2026, one for life and one for non-life insurers, tasked with aligning the proposed risk-based capital (RBC) framework with Indian Accounting Standards (Ind AS). Both groups have one month to produce an exposure draft of RBC regulations and an accompanying approach paper, according to Business Standard.
The life panel draws from LIC, SBI Life, HDFC Life, ICICI Prudential Life, Bajaj Life, Tata AIA, Kotak Life, Bandhan Life, and Aditya Birla Life, as well as Munich Re and the Institute of Actuaries of India. The non-life group includes representatives from New India Assurance, ICICI Lombard, Bajaj General, SBI General, Tata AIG, Niva Bupa, IndusInd General, and Kiwi General, alongside Swiss Re and the Institute of Actuaries of India.
Read more: India insurers face accounting shake-up after IRDAI rule change
India’s existing solvency regime is based on a fixed-formula approach inherited from European Solvency I, introduced in 1979. Capital requirements are calculated using broad proxies rather than the actual risk profile of a carrier’s book, and the framework offers only limited credit for reinsurance arrangements.
Under the proposed RBC regime, capital would be calibrated to the specific risks each carrier writes. Insurers with well-diversified books or strong reinsurance programmes could hold less capital; those writing higher-risk business would need more. Capital charges would be applied across market risk, underwriting risk, credit risk, and operational risk – based on an economic balance sheet.
According to a November 2025 joint report by PwC India and ASSOCHAM, India remains the last major Asian geography with a factor-based solvency approach. Hong Kong adopted RBC in 2024; the European Union moved to Solvency II in 2016. IRDAI completed two quantitative impact studies as part of its preparation – QIS 1 in 2023 and QIS 2 in October 2025 – the second of which the same report described as “the pivotal step towards transition.”
A central challenge being resolved now is that the RBC framework and Ind AS – both under implementation simultaneously – use different bases for valuing assets and liabilities. Running them separately could increase compliance costs, create reconciliation complexities, and open the door to regulatory arbitrage. IRDAI has directed that any convergence must not dilute the prudential objective of the RBC regime, which is protecting policyholders at a defined confidence level.
IRDAI chairman Ajay Seth, speaking at the 25th Global Actuarial Conference in Mumbai in February 2026, underscored the scale of the transition: “India needs more qualified actuaries to strengthen financial protection, especially when we are moving towards adopting risk-based capital and converging to international financial reporting standards.”
Read more: Foreign capacity floods India, testing GIC Re’s home-turf grip
The transition has direct commercial consequences for those placing or structuring business in the Indian market.
Under the current framework, capital requirements are largely insensitive to what a carrier actually underwrites. A carrier writing complex long-tail liability or high-exposure catastrophe business carries the same formula as one writing low-risk personal lines – a bluntness that creates distortions in pricing across the market.
Under RBC, carriers writing riskier lines face higher capital demands, and that cost works through into pricing. Lines that have been cross-subsidised by simpler solvency calculations may see adjustments.
The reinsurance dimension is equally material. Under the proposed rules, reinsurance arrangements are explicitly included in the capital calculation, with counterparty default risk tracked against the credit rating of each reinsurer. That changes the value attributed to treaties and will influence how carriers structure cession strategies – giving well-rated reinsurers a clearer capital advantage, and changing the terms on which brokers can negotiate placements.
The presence of Munich Re and Swiss Re on the respective working groups signals that the reinsurance dimension of the framework is being addressed at the design stage.
The working groups will assess whether certain assumptions should be prescribed uniformly across the industry or whether carriers should have flexibility within defined ranges. All recommendations must be backed by data, quantified impact assessments, and sensitivity testing.
They will also prepare submission templates for RBC data, covering the economic balance sheet, reconciliation between Ind AS and RBC figures, and capital sensitivities. The groups are further tasked with recommending whether the converged framework should be adopted for actuarial valuation under Sections 13 and 49 of the Insurance Act, 1938 – meaning the implications extend beyond reporting into the legal valuation of assets and liabilities held by Indian carriers.
For further context on how Indian insurers are navigating the broader regulatory overhaul alongside this capital transition, see our coverage of IRDAI’s proposed distribution reforms and the broker response.
