In order to encourage consolidation in the private sector insurance industry, the regulator IRDA on Wednesday said it would come out with a framework for mergers and acquisitions (M&A) for the sector by the end of current fiscal.

"Given what is happening in the market, it is an opportune time for mergers and acquisitions," IRDA chairman J Hari Narayan said at a function organised by FICCI in New Delhi.

Appropriate guidelines for M&A in the insurance sector was being worked out, he said, adding, "the exposure draft (draft guidelines) would be ready by March 2009".

As of now, there are no specific guidelines for M&A activity in the insurance sector in the country.

There are 21 life insurance companies and 20 non-life insurance companies operating in the country right now.

Asked about changes in the solvency margin for the insurance sector, the regulator said, it might be imprudent to relax solvency norms in the current situation. "Certain amount of conservatism towards solvency regime has proved beneficial," he added.

"So, I think to expect wide-ranging changes in the solvency requirement in the insurance sector is immature and even be imprudent at this point of time," he said.

Expressing concern over the widening asset-liability mismatch, IRDA chief said, "We are getting into asset-liability mismatch of varying degrees. There is a lack of long-term securities in the market, which might impact certain kind of liabilities."

Narayan added that IRDA would be taking up issues concerning asset-liability mismatch with the finance ministry.

"After 9/11, most companies refused to give cover against terrorism. General insurance companies then formed a pool, into which the premium collected by the industry was put," says Vineet Vidyarthi, Principal Officer, Almondz Insurance Brokers Ltd.

Vidyarthi says sometimes insurance companies deny compensation citing various terms and conditions. According to Insurance Regulatory and Development Authority (IRDA) norms, general insurers should form a pool for terrorism insurance.

Any terrorism-related insurance claim can be settled by using funds from this pool.

General insurers offer terror insurance as an adjunct of fire insurance. "We try to clear the account within 24 hours of the claim. And in this kind of cases, we don't even ask for death certificates," an insurance executive said.

Apart from Mumbai, in the last one year, the country has seen many terror attacks. Many people have been killed in the ghastly attacks in Assam, Malegaon, Delhi, Ahemdabad and Hyderabad.