The Telegraph
Since 1st March, 1999
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Revaluation bridge to meet LIC solvency gap

New Delhi, July 14: Life Insurance Corporation of India has written to the insurance regulator seeking permission to meet the over Rs 5000-crore shortfall in its solvency margin by revaluing its assets and taking credit for the capital appreciation in its investment portfolio.

“We have asked the Insurance Regulatory Development Authority (IRDA) to allow us to revalue our assets and also give us the credit for appreciation of our investment portfolio,” said a senior LIC official after the launch of the Varistha Bima Pension Yojna here today.

However, an IRDA official told The Telegraph, “LIC may have huge investments. But this is not the right method for calculating the solvency margin. The insurer has promised us to fulfil its solvency margin by March 31, 2004.”

Recently, LIC chairman S. B. Mathur had written to all zonal managers stating that the insurer faced a shortfall of Rs 5,400 crore in its solvency margin as prescribed by the regulator.

The IRDA has defined the solvency margin as the excess of value of assets to the liabilities, including policyholders and shareholders fund. Life insurance companies have been mandated a solvency ratio (the ratio of available solvency margin to the amount of required solvency margin of 1.5 times).

As per LIC officials, the insurer was required to maintain a solvency margin of Rs 10,796 crore at the end of March 2002. But the insurer could only arrange Rs 5,525 crore cumulatively contributed by share capital of Rs 5 crore, general reserves of Rs 85 crore and other reserves of Rs 5,435 crore.

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