Inside the IRDAI Actuarial, Finance and Investment Functions of Insurers Regulations 2024: Solvency and Investment Rules Consolidated
The IRDAI 2024 rulebook merged nine regulations into one, fixing the 150% solvency control level under Section 64VA and capping where insurers invest your premiums. Explained with worked numbers.
On 20 March 2024 the Insurance Regulatory and Development Authority of India (IRDAI) notified one of the most consequential rulebooks in its 2024 consolidation drive: the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024, registered as F. No. IRDAI/Reg/10/204/2024 and gazetted on 22 March 2024 (Gazette of India, Extraordinary, Part III, Section 4, No. 209). The regulations came into force from the date of their Gazette publication or 1 April 2024, whichever is later, and apply to every insurer, including those engaged exclusively in reinsurance. For policyholders, this single document now governs the two things that decide whether a claim can actually be paid years from now: whether the insurer stays solvent, and where it is allowed to invest your premiums.
This explainer sets out exactly what the 2024 rulebook says, using only the text of the gazette notification and Section 64VA of the Insurance Act, 1938. Numbers that are not drawn directly from the regulation are flagged as illustrative.
The Rule / Product
The 2024 regulations are a consolidation, not a fresh policy invention. IRDAI took nine separate, overlapping regulations and merged them into a single principle-based framework that covers the appointed actuary, the valuation of assets and liabilities, bonus (surplus) distribution, asset-liability management, solvency margins and the investment of insurer funds. Regulation 9 of the new rulebook lists exactly which earlier regulations were repealed from 1 April 2024.
| Earlier regulation repealed (per Regulation 9) | Year |
|---|---|
| Actuarial Report and Abstract for Life Insurance Business | 2016 |
| Distributions of Surplus | 2002 |
| Assets, Liabilities and Solvency Margin of Life Insurance Business | 2016 |
| Assets, Liabilities and Solvency Margin of General Insurance Business | 2016 |
| Investment Regulations | 2016 |
| Appointed Actuary | 2022 |
| Preparation of Financial Statements and Auditors' Report of Insurance Companies | 2002 |
| Inspection and Fee for Supply of Copies of Returns | 2015 |
| Loans or Temporary Advances to Full Time Employees of the Insurers | 2016 |
The notification, signed by IRDAI Chairperson Debasish Panda on 20 March 2024, draws its authority from Sections 11, 13, 20, 27, 27A, 27B, 49, 64V and 64VA of the Insurance Act, 1938, read with Sections 14 and 26 of the IRDA Act, 1999. Regulation 1(4) requires the rulebook to be reviewed once every three years, unless an earlier review is warranted.
Three statutory machines sit inside this framework. First, the appointed actuary: Part II of Schedule I requires every registered insurer to appoint an actuary, approved by IRDAI, who must be an Ordinarily Resident Fellow member of the Institute of Actuaries of India under the Actuaries Act, 2006. A life insurer's appointed actuary needs at least 12 years of life-insurance experience, of which at least 7 are post-fellowship; a general insurer's needs at least 9 years, of which at least 4 are post-fellowship. This is the professional who signs off that your insurer's reserves are enough to meet promised benefits. (See our glossary entry on the actuary for the role in plain terms.)
Second, the solvency margin. Under Section 64VA(3) of the Insurance Act, 1938, IRDAI sets a control level of solvency. The 2024 regulations fix that control level at 150 per cent of the Required Solvency Margin for general insurers, standalone health insurers and reinsurers, and every insurer must maintain its solvency margin at or above that control level at all times. The Solvency Ratio is reported as Available Solvency Margin divided by Required Solvency Margin (Form IRDAI-GI-SM and Form KT-3).
Third, the investment pattern, which dictates how premiums are deployed so that the money is there when claims fall due.
Why It Matters
Solvency is the single most important number a policyholder never sees on a premium receipt. A solvency ratio of 150 per cent, mandated under Section 64VA(3), means an insurer must hold assets worth one-and-a-half times the minimum reserve needed to cover all its liabilities before it can write business freely. The gap between that 150 per cent floor and 100 per cent is the statutory cushion that protects a 20-year or 30-year term insurance promise against bad years.
The investment rules matter for the same reason. When you pay a premium, the insurer does not park it in cash; it invests it to earn the returns that back guaranteed benefits and bonuses. The 2024 regulations cap how much of that money can chase risky assets. For a traditional life fund, at least 50 per cent must sit in government and other approved securities, and no more than 15 per cent may go into the riskiest "other investments" category under Section 27A(2) of the Insurance Act, 1938. That ceiling is why a with-profits or endowment-style policy cannot be run like an equity fund.
For unit-linked buyers the logic flips but the protection remains: the rule on Unit Linked Insurance Business requires at least 75 per cent of each segregated ULIP fund to sit in approved investments, with the rest following the pattern subscribed to by the policyholder. If you are weighing a ULIP against a mutual fund, our ULIP versus mutual fund calculator shows how charges and this 75 per cent floor shape net returns. The consolidation also means that the reinsurance arrangements backing large health and motor books are now governed under the same solvency umbrella, a point we examined in our report on IRDAI moving reinsurance reporting onto one digital platform.
Worked Numbers
Two calculations show how the 2024 regulations bite. The figures below are illustrative; only the percentages are drawn from the gazette.
Example 1 - the solvency ratio. Suppose a life insurer holds policyholder and shareholder assets of Rs 9,000 crore against mathematical reserves and other liabilities of Rs 7,500 crore. The Available Solvency Margin (ASM) is the excess, Rs 1,500 crore. If the Required Solvency Margin (RSM) worked out under Schedule I is Rs 900 crore, the Solvency Ratio is:
Solvency Ratio = ASM / RSM = Rs 1,500 crore / Rs 900 crore = 166.7 per cent.
Because 166.7 per cent is above the 150 per cent control level set under Section 64VA(3), this insurer is compliant. Had liabilities risen to Rs 7,650 crore, ASM would fall to Rs 1,350 crore and the ratio to 150 per cent exactly - the point at which IRDAI's supervisory attention begins.
Example 2 - where Rs 100 crore of a life fund must go. Applying the controlled-fund pattern in the 2024 regulations to a notional Rs 100 crore:
| Investment category (life insurer controlled fund) | Regulatory limit | On Rs 100 crore |
|---|---|---|
| Central Government Securities | Not less than 25% | At least Rs 25 crore |
| Central + State Government + other approved securities | Not less than 50% (incl. the 25%) | At least Rs 50 crore |
| Approved investments (clause 2) plus other investments | Not exceeding 50% | Up to Rs 50 crore |
| Other investments under Section 27A(2) | Not exceeding 15% | Up to Rs 15 crore |
| Housing and infrastructure (categories i-iv together) | Not less than 15% | At least Rs 15 crore |
So on a Rs 100 crore life fund, a minimum of Rs 25 crore is locked into central government paper and a minimum of Rs 50 crore into sovereign-grade securities, while the riskiest sleeve is hard-capped at Rs 15 crore. The general-insurance pattern is looser on the sovereign side but identical on risk:
| Investment category (general insurer) | Regulatory limit |
|---|---|
| Central Government Securities | Not less than 20% |
| Central + State Government + other approved securities | Not less than 30% (incl. the 20%) |
| Approved plus other investments together | Not exceeding 70% |
| Other investments under Section 27A(2) | Not more than 15% |
| Housing and infrastructure together | Not less than 15% of investment assets |
For pension, annuity and group business the regulations are stricter still: at least 20 per cent in Central Government Securities, at least 40 per cent in sovereign-grade securities, the balance of not more than 60 per cent in approved investments, and no exposure at all to the "other investments" category. These floors are the structural reason your health insurance premium buys a claim promise that does not evaporate in a market crash.
Pitfalls
A high solvency ratio is a floor, not a guarantee of service. The 150 per cent control level under Section 64VA(3) measures capital adequacy, not claims behaviour. An insurer can be comfortably above 150 per cent and still apply sub-limits, co-payments and room-rent caps on your policy. Solvency tells you the company can pay; the policy wording tells you how much of a given claim it will pay. Always read both.
"Approved investments" is not the same as "safe for your returns." The 15 per cent ceiling on Section 27A(2) "other investments" limits the insurer's balance-sheet risk, but in a ULIP the market risk of the fund you choose passes to you. The 75 per cent approved-investment floor applies to each segregated ULIP fund, yet the equity-heavy fund options within that pattern can still fall sharply. Do not read the solvency framework as downside protection on unit-linked returns.
The consolidation repealed the Distributions of Surplus Regulations, 2002. Bonus and surplus distribution for participating policies is now governed inside the 2024 rulebook rather than a standalone 2002 regulation. If older policy documents or advisers cite the 2002 regulation by name, that reference is stale as of 1 April 2024; the governing provisions moved.
Branch business abroad cannot be used to lower reserves. Where an insurer writes business through a foreign branch and the host country's solvency norms are lighter, the appointed actuary must set aside additional reserves so that Indian solvency standards are met. Policyholders of such insurers are not exposed to weaker overseas rules.
Solvency is reported, not continuous-audited in real time. The Available Solvency Margin and Solvency Ratio are struck on the valuation date (typically 31 March) in Form KT-3 and Form IRDAI-GI-SM. A ratio quoted from last year's annual report can move materially before the next filing, so treat any single published figure as a snapshot. For the same reason, our note on the surrender value you would receive on exit matters more to your own cash flow than the headline solvency number.
FAQ
What is the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024?
It is a consolidated rulebook notified on 20 March 2024 (F. No. IRDAI/Reg/10/204/2024) and effective from 1 April 2024. It merges nine earlier regulations - covering the appointed actuary, solvency margins, asset-liability management, surplus distribution and the investment of insurer funds - into one principle-based framework under the Insurance Act, 1938.
What solvency ratio must an Indian insurer maintain?
Under Section 64VA(3) of the Insurance Act, 1938, the 2024 regulations set the control level of solvency at 150 per cent of the Required Solvency Margin. Every general insurer, standalone health insurer and reinsurer must keep its solvency margin at or above this control level at all times. The Solvency Ratio is reported as Available Solvency Margin divided by Required Solvency Margin.
How much of my premium can an insurer invest in risky assets?
For a life insurer's controlled fund, at least 25 per cent must be in Central Government Securities and at least 50 per cent in government and other approved securities; no more than 15 per cent may go into "other investments" under Section 27A(2). For general insurers the sovereign floor is 20 per cent and 30 per cent respectively, with the same 15 per cent cap on the riskiest category.
Does a strong solvency ratio mean my claim will be paid in full?
No. The 150 per cent control level confirms the insurer has the capital to meet liabilities, but it does not override policy wording. Sub-limits, co-payments, room-rent caps and pre-existing-disease waiting periods still determine how much of an individual claim is payable. Read the policy document alongside the solvency figure.
What are the rules for ULIP fund investments under the 2024 regulations?
For unit-linked business, at least 75 per cent of each segregated fund must be held in approved investments, with the remainder following the investment pattern the policyholder subscribed to. Market risk on the chosen fund still rests with the policyholder, so the 75 per cent floor limits the insurer's risk, not your return volatility.
Who is the appointed actuary and why does it matter to me?
The appointed actuary, approved by IRDAI under Part II of Schedule I, is the Fellow of the Institute of Actuaries of India (under the Actuaries Act, 2006) who certifies that your insurer's reserves and solvency are adequate. A life insurer's appointed actuary needs at least 12 years of experience (7 post-fellowship); a general insurer's needs at least 9 years (4 post-fellowship).
How often is this regulation reviewed?
Regulation 1(4) requires the rulebook to be reviewed once every three years from its publication, unless an earlier review, repeal or amendment is warranted. The first such review window therefore falls due by 2027, measured from the March 2024 publication.