The Life Insurance Corporation will fall in line with the other private insurers in meeting the Insurance Regulatory and Development Authority's stringent norms on solvency margin by providing an aggregate Rs 10,000 crore (Rs 100 billion) by the end of 2003-04.

"The LIC has submitted a plan of action, envisaging that they will meet the solvency margin by March 31, 2004," C S Rao, the chairman of IRDA, said on the sidelines of a Ficci-World Bank insurance seminar in New Delhi on Wednesday.

LIC has already provided Rs 3,500 crore (Rs 35 billion) last fiscal, and is expected to provide the balance Rs 6,500 crore (Rs 65 billion) this fiscal. This is irrespective of the assets on account of LIC's real estates.

The IRDA stipulates that the insurers should always maintain a 150 per cent solvency margin, which means that the assets should be in excess of liabilities.

"It is a technical requirement. We are satisfied with LIC's plan," Rao said.

LIC has hitherto been exempted from meeting the solvency margin as it has huge hidden reserves amounting to over Rs 50,000 crore (Rs 500 billion). The insurer has assets in excess of Rs 2,40,000 crore (Rs 2,400 billion) and has over 90 per cent market share.

Since the LIC has a capital base of only Rs five crore and there has been no capital infusion after that, the regulator had asked the insurance major to provide about Rs 10,000 crore (Rs 100 billion) for meeting the solvency margin.

In order to hike the paid-up capital of LIC, the government has to amend the LIC Act, Rao clarified.

The move assumes significance in the wake of the Law Commission's recent consultation paper, envisaging that the insurers should meet the solvency norms laid down by IRDA.