hyderabadmumbai the liquidity crunch could force insurance regulator irda to review domestic insurers business plans and assess whether companies can infuse extra funds during this financial year money has become scarce due to the global financial meltdown the ripples are being felt back home with banks reeling under a liquidity crunch insurers need capital to grow and promoters have to bring in extra capital till the venture breaks even banks have been promoters behind some of the insurance ventures in the country the indian banks are wellcapitalised according to the banking regulator but they have been indirectly impacted by the global crisisdomestic insurers are relatively insulated from the crisis as they have no any overseas exposure irda is still likely to review their ability to infuse extra capital to push growth the domestic insurance industry is wellcapitalised but we need to examine the impact of recent developments in financial markets on the functioning of domestic insurance ventures this would mean assessing their business projections and future capital requirements said r kannan member irdait is important to distinguish between solvency margins and capital requirements based on business projections solvency margins refer to the excess assets maintained by an insurer in the interest of policyholders the difference between actual capital and solvency capital is the amount available for writing the new businessthe solvency margins are comfortable for all domestic insurers last month irda clarified that tata life and tata aig general insurance had comfortable solvency margins this was to allay the fears of policyholders after the us insurer aig ran into troublethe solvency margins for all domestic insurers is around 200 compared with the prescribed norm of 150 the extra 50 can be used to write new business if an insurers business projection crosses this threshold the company has to bring in extra capital to maintain the solvency said mr kannan if an insurance company is unable to garner extra capital it may have to go slow on writing new business when business growth takes a hit the breakeven point of a company will be pushed even furthera ceo of a life insurance company fears that a business slowdown could reduce the capital requirements of insurance companies the sliding markets called for a change in product strategy however companies that made huge investments in anticipation of new business could face a problem he saidthe volatility in equity markets has impacted the sale of unitlinked insurance products ulips the risk in this case is entirely borne by the investor there are 42 insurance ventures in the country including 21 life 20 nonlife and one reinsurer total assets under management aum are said to exceed rs 8lakh crore