Capital efficiency of Indian insurers tested

New capital disclosure norms coming into effect next month would test Indian insurnace companies' capital efficiency. The new rules would require the companies to provide a detailed break-up of capital required for various businesses and the amount of capital that they might lose under various situations

This poses a unique challenge to Indian insurers as they will need to conserve capital in a market with excellent growth potential. There is a clear deficiency of capital management financial tools such as securitisation or reinsurance of their businesses. This would imply constant supply of capital by the insurers. (reported by Economic Times citing Ernst & Young)