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

Himalaya Insurance IFSC Ltd finds that its available solvency margin has fallen below the required solvency margin at the quarter end. What is the most appropriate compliance step for its Principal Officer and compliance officer?

The insurer should promptly inform IFSCA of the solvency shortfall and submit a corrective plan to restore the margin. A solvency breach is a material prudential matter, so waiting for the annual filing, hiding it, or surrendering registration without notice would be non-compliant.

  1. AWait until the next annual filing and disclose the shortfall then
  2. BInform the IFSCA promptly and submit a plan to restore the margin, since the shortfall is a prudential breachCorrect
  3. CTransfer the shortfall to the policyholders' reserve without any disclosure
  4. DCancel its registration voluntarily without informing the IFSCA

Explanation

A solvency shortfall is a material prudential breach that the regulator expects to be reported promptly, with corrective action to restore the margin. Deferring disclosure to the annual filing conceals the risk. Shifting the shortfall to policyholders or quietly cancelling registration are not permitted routes.

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