Insurance Hybrids

The Insurance Regulatory and Development Authority (IRDA) had allowed insurance companies to raise non-equity forms of capital such as subordinated debt or preference shares that would be eligible as capital for computation of the solvency margins of insurance companies.

CRISIL was the first credit rating agency in India to introduce the Financial Strength Rating (FSR) for insurance companies in March 1998. Leveraging on its expertise in this sector, CRISIL developed a sound methodology and rated the first hybrid issuance by an Indian insurance company in April 2016.

Since then, CRISIL has rated five such issuances, aggregating R 2008 crore, which have been placed at competitive yields. CRISIL’s rating methodology for hybrid instruments issued by insurance companies takes into account the overall credit quality of insurers through FSR, and factors in the additional risks that these instruments carry on account of restriction on debt servicing.

Financial Strength Ratings assess an insurance company's ability to meet policyholder obligations. However,  the ratings are not recommendations to purchase or discontinue a policy, contract, or security issued by an insurance company, nor are they guarantees of financial strength.

Our rating methodology for life and non-life insurance companies entails assessing the companies on a standalone basis, as well as assessing the level of parent/government support that they receive.

We evaluate a company on the following criteria:

  • Industry risk and business risks across segments
  • Financials
  • Risk management systems
  • Goals and strategies and projected business plan
  • Parental support

Financial Strength Ratings does not take into account:

  • Timeliness of payment or the likelihood of the use of a defence, such as fraud, to deny claims
  • Any potential that may exist for foreign exchange restrictions to prevent policy obligations from being met (for insurance companies with cross-border or multi-national operations, including those conducted by branch offices or subsidiaries)
  • The insurance company's ability to meet non-policy obligations (debt contracts)


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