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CS Professional · IFSCA - Regulations, Listing and Compliances · Insurance and Reinsurance

During the year an IIO in GIFT IFSC finds that its solvency ratio has fallen below the level prescribed by IFSCA after heavy claim payments. Which course is consistent with ongoing compliance expectations?

The IIO should promptly inform IFSCA of the solvency shortfall and take corrective action, such as infusing capital, to restore the prescribed level. Deferring disclosure to the annual return, or assuming reinsurance or reclassifying liabilities cures it, is inconsistent with prudential supervision.

  1. AWait for the next annual return and disclose the position then
  2. BInform IFSCA promptly and take corrective steps, such as capital infusion, to restore the required levelCorrect
  3. CContinue writing new business and rely on reinsurance to cure the shortfall automatically
  4. DTransfer the shortfall to the policyholders' liabilities account

Explanation

A solvency shortfall is a prudential breach that must be reported promptly to the regulator, with remedial action such as bringing in capital. Waiting for the annual return delays supervision, and reinsurance or reclassification does not by itself cure a breach.

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