Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Topics
1. Riders
2. Third Party Administrators
3. CAT bonds
4. Mathematical reserves
5. Law of large numbers
6. Incurred But Not Reported claims
7. Social and rural sector obligations of insurance
8. Bancassurance
9. Investment guidelines- Asset Liability and Solvency margins of IRDA
10. Investment norms
11. Names of all life and non-life insurance companies registered in India, their punch
lines and websites
12. Reinsurance
13. Globalization of insurance (penetration, density, catastrophe especially Japan case)
14. Indemnity and application of its corollaries
15. Insurance is a business of probability and large numbers
16. All principles and corollaries
17. Twin financial objectives of insurance
18. Problem of duality
19. Prepare at least 5 life and non-life products (About the product, covered and excepted
perils, calculation of premium, claim settlement, and statistics if available and marketing
strategy used by the company for this product)
20. Enterprise Risk Management
“The ones in Bold are contained into this document, & hope for the rest to be completed
soon…… “
- Khalid
Centre for Management Studies
Jamia Millia Islamia
New Delhi
1. Riders
http://www.moneycontrol.com/insurance/riders.php
Riders are the additional benefits that you may buy and add to your policy. They are options that allow
you to enhance your insurance cover, qualitatively and quantitatively. Riders can be mixed and matched
based on one’s preferences for a small additional cost. As ‘one size fits all’ approach does not apply to
insurance it makes sense to cover risk based on factors that are unique to you. Simply put, these are
add-on benefits attached to policies in case of eventualities.
Here are a few riders and what they generally cover :
Level term cover rider
• This provides you the option to enhance your risk cover for a limited period, up to a
maximum of the sum assured on your base policy.
• It solely offers death benefit and helps the survivors to meet any unforeseen expenses that
need to be taken care of, or some liabilities to be cleared of in event of death of the policyholder.
• For example - Your need for life insurance cover is Rs 10 lakh. If you take a policy for a sum
assured of Rs 10 lakh, you would have to pay a high premium whereas if you go in for a Rs 5
lakh life cover, and add a term rider for Rs 5 lakh, you can satisfy your insurance requirement at a
far lower premium. Although, the survival benefits will be proportionately lower in this case, the
basic need for life insurance is met at a far lower cost.
Double sum assured rider
• This provides for an additional amount equivalent to the basic sum assured to the survivors in
case of an unfortunate death of the policyholder
• With a little extra premium the policyholder can double his life cover at a nominal cost as
compared to opting for a larger endowment policy.
• It is commonly found that the policyholder is the main source of income of the family and in case
of an unforeseen event of his death, his survivors are likely to need more money to manage the
household, thus the double sum assured rider caters to such a situation.
Health care
Third party administrators are prominent players in the managed care industry and have the
expertise and capability to administer all or a portion of the claims process. They are normally
contracted by a health insurer or self-insuring companies to administer services, including claims
administration, premium collection, enrollment and other administrative activities. A hospital or
provider organization desiring to set up its own health plan will often outsource certain
responsibilities to a TPA.
For example, an employer may choose to help finance the health care costs of its employees by
contracting with a TPA to administer many aspects of a self-funded health care plan.
Retirement plans
Retirement plans such as a 401(k) are often partly managed by an investment company. Instead
of handling all the plan contributions by employees, distributions to employees, and other
aspects of plan processing, the investment company may contract with a third party administrator
to handle much of the administrative work and only handle the remaining investment work.
3. CAT bonds
http://en.wikipedia.org/wiki/Cat_bonds
http://www.investopedia.com/terms/c/catastrophebond.asp
Catastrophe bonds (also known as cat bonds) are risk-linked securities that transfer a specified
set of risks from a sponsor to investors. They were created and first used in the mid-1990s in the
aftermath of Hurricane Andrew and the Northridge earthquake.
Catastrophe bonds emerged from a need by insurance companies to alleviate some of the risk
they would face if a major catastrophe occurred, which would incur damages that they could not
cover by the premiums, and returns from investments using the premiums, that they
received[citation needed]. An insurance company issues bonds through an investment bank, which are
then sold to investors. These bonds are inherently risky, generally BB[citation needed], and are
multiyear deals. If no catastrophe occurred, the insurance company would pay a coupon to the
investors, who made a healthy return. On the contrary, if a catastrophe did occur, then the
principal would be forgiven and the insurance company would use this money to pay their
claimholders. Investors include hedge funds, catastrophe-oriented funds, and asset managers.
They are often structured as floating rate bonds whose principal is lost if specified trigger
conditions are met. If triggered the principal is paid to the sponsor. The triggers are linked to
major natural catastrophes. Catastrophe Bonds are typically used by insurers as an alternative to
traditional catastrophe reinsurance.
For example, if an insurer has built up a portfolio of risks by insuring properties in Florida, then
it might wish to pass some of this risk on so that it can remain solvent after a large hurricane. It
could simply purchase traditional catastrophe reinsurance, which would pass the risk on to
reinsurers. Or it could sponsor a cat bond, which would pass the risk on to investors. In
consultation with an investment bank, it would create a special purpose entity that would issue
the cat bond. Investors would buy the bond, which might pay them a coupon of LIBOR plus a
spread, generally (but not always) between 3 and 20%. If no hurricane hit Florida, then the
investors would make a healthy return on their investment. But if a hurricane were to hit Florida
and trigger the cat bond, then the principal initially paid by the investors would be forgiven, and
instead used by the sponsor to pay its claims to policyholders.[1]
Michael Moriarty, Deputy Superintendent of the New York State Insurance Department, has
been at the forefront of state regulatory efforts to have U.S. regulators encourage the
development of insurance securitizations through cat bonds in the United States instead of off-
shore, through encouraging two different methods—protected cells and special purpose
reinsurance vehicles.[2] In August 2007 Michael Lewis, the author of Liar's Poker and
Moneyball, wrote an article about catastrophe bonds that appeared in The New York Times
Magazine, entitled "In Nature's Casino."[3]
Catastrophe bonds (also known as cat bonds) are risk-linked securities that transfer a specified
set of risks from a sponsor to investors. They were created and first used in the mid-1990s in the
aftermath of Hurricane Andrew and the Northridge earthquake.
Catastrophe bonds emerged from a need by insurance companies to alleviate some of the risk
they would face if a major catastrophe occurred, which would incur damages that they could not
cover by the premiums, and returns from investments using the premiums, that they
received[citation needed]. An insurance company issues bonds through an investment bank, which are
then sold to investors. These bonds are inherently risky, generally BB[citation needed], and are
multiyear deals. If no catastrophe occurred, the insurance company would pay a coupon to the
investors, who made a healthy return. On the contrary, if a catastrophe did occur, then the
principal would be forgiven and the insurance company would use this money to pay their
claimholders. Investors include hedge funds, catastrophe-oriented funds, and asset managers.
They are often structured as floating rate bonds whose principal is lost if specified trigger
conditions are met. If triggered the principal is paid to the sponsor. The triggers are linked to
major natural catastrophes. Catastrophe Bonds are typically used by insurers as an alternative to
traditional catastrophe reinsurance.
For example, if an insurer has built up a portfolio of risks by insuring properties in Florida, then
it might wish to pass some of this risk on so that it can remain solvent after a large hurricane. It
could simply purchase traditional catastrophe reinsurance, which would pass the risk on to
reinsurers. Or it could sponsor a cat bond, which would pass the risk on to investors. In
consultation with an investment bank, it would create a special purpose entity that would issue
the cat bond. Investors would buy the bond, which might pay them a coupon of LIBOR plus a
spread, generally (but not always) between 3 and 20%. If no hurricane hit Florida, then the
investors would make a healthy return on their investment. But if a hurricane were to hit Florida
and trigger the cat bond, then the principal initially paid by the investors would be forgiven, and
instead used by the sponsor to pay its claims to policyholders.[1]
Michael Moriarty, Deputy Superintendent of the New York State Insurance Department, has
been at the forefront of state regulatory efforts to have U.S. regulators encourage the
development of insurance securitizations through cat bonds in the United States instead of off-
shore, through encouraging two different methods—protected cells and special purpose
reinsurance vehicles.[2] In August 2007 Michael Lewis, the author of Liar's Poker and
Moneyball, wrote an article about catastrophe bonds that appeared in The New York Times
Magazine, entitled "In Nature's Casino."[3]
4. Mathematical reserves
http://www.frc.org.uk/documents/pagemanager/bas/GN44%20Mathematical%20Reserve
s%20and%20Resilience%20Capital%20Requirement%20V2.0%20(BAS%20Amendmen
t%201).pdf
Classification
Practice Standard
Purpose The FSA Prudential Sourcebooks (INSPRU and GENPRU) require insurance
companies and Directive friendly societies with long-term insurance liabilities to establish
mathematical reserves and, where applicable, a resilience capital requirement in respect of these
liabilities. They also set out detailed rules and guidance to follow in calculating these items,
including in particular a requirement to use methods and assumptions which are in accordance
with generally accepted actuarial practice, and more generally to establish adequate technical
provisions with due regard to generally accepted actuarial practice. The FSA Handbook states
that guidance notes such as this are important sources of evidence as to generally accepted
actuarial practice. This note therefore provides additional guidance to insurers and Directive
friendly societies on how to meet these requirements. Guidance for non-Directive friendly
societies is contained in GN8.
Definitions Terms defined by the FSA Handbook appear in italics when used in this document
and have the same meaning.
Legislation or Authority
The Financial Services and Markets Act 2000 The FSA Handbook of Rules and Guidance:
Application
The establishment of technical provisions in accordance with the rules and guidance relating to
mathematical reserves, and the calculation of the resilience capital requirement if required.
5. Law of large numbers
http://www.hmrc.gov.uk/manuals/gimanual/gim1130.htm
The majority of insurers, however, will be unwilling or unable to go back to their policyholders
for additional payment if losses turn out to be greater than expected. They must rely on a cushion
of working capital (provided by the shareholders in anticipation of an investment return in a
proprietary company) to meet such losses. One of the main aims of insurance regulators is to
ensure that companies always have a sufficient margin of assets over estimated liabilities
appropriate to the business that they conduct.
The sharing and pooling of risk is still, however, vitally important. In the real world the pattern
of losses (cars stolen or houses burning down) is unstable. Suppose that, on average, one car in
ten is stolen each year. If the thefts are independent of one another an insurer who had only
insured ten cars would find that there was a one in four chance that two or more would be stolen,
which would double the expected outlay on claims. It would not be possible to do business on
that basis.
But if 100,000 cars are insured, the probability that more than 10,200 (or less than 9,800) will be
stolen is only about 1%. This is an example of the operation of the ‘law of large numbers’, which
may be expressed as follows:
"The observed frequency of an event more nearly approaches the underlying probability of the
population as the number of trials approaches infinity."
In other words, the more cars insured, the more accurately can be predicted the percentage of
cars likely to be stolen. It is this aspect of probability theory that enables the insurer to cope with
variations in the pattern of actual losses. Underwriters and actuaries may also consider various
measures of dispersion, that is the difference between the actual losses and average losses, when
setting premiums or assessing liabilities.
6. Incurred But Not Reported claims
http://en.wikipedia.org/wiki/Incurred_but_not_reported
In exercise of the powers conferred by section 32C read with section 32B of the
Insurance Act, 1938, (4 of 1938), the Authority, in consultation with the Insurance
Advisory Committee, hereby makes the following regulations to substitute the Insurance
Regulatory and Development Authority (Obligations of Insurers to Rural Social Sectors)
Regulations, 2000, namely: -
1. 1. Short title and commencement. ---- (1) These regulations may be called the
Insurance Regulatory and Development Authority (Obligations of Insurers to Rural or
Social Sectors) Regulations, 2002.
(2) They shall come into force from the date of their publication in the Official Gazette.
a. “Rural sector” shall mean any place as per the latest census which meets the
following criteria--
i. a population of less than five thousand;
ii. a density of population of less than four hundred per square kilometer; and
iii. more than twenty five per cent of the male working population is engaged in agricultural
pursuits.
Explanation :-
a. “economically vulnerable or backward classes” means persons who live below the
poverty line;
a. “other categories of persons” includes persons with disability as defined in the Persons
with Disabilities (Equal Opportunities, Protection of Rights, and Full Participation) Act,
1995 and who may not be gainfully employed; and also includes guardians who need
insurance to protect spastic persons or persons with disability;
(h) “informal sector” includes small scale, self-employed workers typically at a low
level of organisation and technology, with the primary objective of generating
employment and income, with heterogeneous activities like retail trade, transport,
repair and maintenance, construction, personal and domestic services and
manufacturing, with the work mostly labour intensive, having often unwritten and
informal employer-employee relationship;
(i) All words and expressions used herein and not defined herein but defined in the
Insurance Act, 1938 (4 of 1938), or in the Insurance Regulatory and Development
Authority Act, 1999 (41 of 1999), shall have the meanings respectively assigned to them
in those Acts.
3. Obligations.--- Every insurer, who begins to carry on insurance business after the
commencement of the Insurance Regulatory and Development Authority Act, 1999 (41
of 1999), shall, for the purposes of sections 32B and 32C of the Act, ensure that he
undertakes the following obligations, during the first five financial years, pertaining to
the persons in---
Provided that in the first financial year, where the period of operation is less than twelve
months, proportionate percentage or number of lives, as the case may be, shall be
undertaken.
Provided further that, in case of a general insurer, the obligations specified shall include
insurance for crops.
Provided further that the Authority may normally, once in every five years, prescribe or
revise the obligations as specified in this Regulation.
(2) The Authority shall review such quantum of insurance business periodically and give
directions to the insurers for achieving the specified targets.
8. Bancassurance
http://en.wikipedia.org/wiki/Bancassurance
The Bank Insurance Model ('BIM'), also sometimes known as 'Bancassurance', is the term
used to describe the partnership or relationship between a bank and an insurance company
whereby the insurance company uses the bank sales channel in order to sell insurance products.
BIM allows the insurance company to maintain smaller direct sales teams as their products are
sold through the bank to bank customers by bank staff.
Bank staff and tellers, rather than an insurance salesperson, become the point of sale/point of
contact for the customer. Bank staff are advised and supported by the insurance company
through product information, marketing campaigns and sales training.
Both the bank and insurance company share the commission. Insurance policies are processed
and administered by the insurance company.
BIM differs from 'Classic' or Traditional Insurance Model (TIM) in that TIM insurance
companies tend to have larger insurance sales teams and generally work with brokers and third
party agents.
An additional approach, the Hybrid Insurance Model (HIM), is a mix between BIM and TIM.
HIM insurance companies may have a sales force, may use brokers and agents and may have a
partnership with a bank.
BIM is extremely popular in European countries such as Spain, France and Austria.
The usage of the term picked up as banks and insurance companies merged and banks sought to
provide insurance, especially in markets that have been liberalised recently. It is a controversial
idea, and many feel it gives banks too great a control over the financial industry or creates too
much competition with existing insurers.
In some countries, bank insurance is still largely prohibited, but it was recently legalized in
countries such as the United States, when the Glass–Steagall Act was repealed after the passage
of the Gramm-Leach-Bliley Act. But revenues have been modest and flat in recent years, and
most insurance sales in U.S. banks are for mortgage insurance, life insurance or property
insurance related to loans. But China recently allowed banks to buy insurers and vice versa,
stimulating the bancassurance product, and some major global insurers in China have seen the
bancassurance product greatly expand sales to individuals across several product lines.
Privatbancassurance is a wealth management process pioneered by Lombard International
Assurance and now used globally. The concept combines private banking and investment
management services with the sophisticated use of life assurance as a financial planning structure
to achieve fiscal advantages and security for wealthy investors and their families.
9. Investment guidelines- Asset Liability
and Solvency margins of IRDA
http://www.irdaindia.org/1983-ALS.rtf
In exercise of the powers conferred by clauses (y), (z) and (za) of sub-section (2) of
section 114A of the Insurance Act, 1938, (4 of 1938), read with section 26 of the
Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), the Authority,
in consultation with the Insurance Advisory Committee, hereby makes the following
regulations, namely:-
(2) They shall come into force from the date of their publication in the Official Gazette.
(2) All words and expressions used herein and not defined but defined in the Insurance
Act, 1938 (4 of 1938), or in the Insurance Regulatory and Development Authority Act,
1999 (41 of 1999), or in any Rules or Regulations made thereunder, shall have the
meanings respectively assigned to them in those Acts or Rules or Regulations.
iv. 6. Health Insurance Business. -- Where the insurer transacts health insurance
business, providing health covers, the amount of liabilities shall be determined in
accordance with the principles specified under these Regulations.
Provided that if the appointed actuary is of the opinion that it is necessary to set
additional reserves over and above the reserves shown in the statements or returns or any
such particulars submitted to the public authority of a country outside India, he may set
such additional reserves.
VALUATION OF ASSETS
(see Regulation 3)
b. Values of Assets.—(1) The following assets should be placed with value zero,--
b. Agent’s balances and outstanding premiums in India, to the extent they are not realised
within a period of thirty days;
c. Agents’ balances and outstanding premiums outside India, to the extent they are not
realisable ;
d. Sundry debts, to the extent they are not realisable;
e. Advances of an unrealisable character;
f. Furniture, fixtures, dead stock and stationery;
g. Deferred expenses;
h. Profit and loss appropriation account balance and any fictitious assets other than pre-paid
expenses;
i. Reinsurer’s balances outstanding for more than three months;
j. Preliminary expenses in the formation of the company;
VI. (2) The value of computer equipment including software shall be computed as
under:--
(i) seventy five per cent. of its cost in the year of purchase;
(ii) fifty per cent. of its cost in the second year;
(iii) twenty-five per cent. of its cost in the third year; and
(iv) zero per cent. thereafter.
VI. (3) All other assets of an insurer have to be valued in accordance with the Insurance
Regulatory and Development Authority (Preparation of Financial Statements and
Auditor’s Report of Insurance Companies) Regulations, 2000.
Form Code: [ ][ ][ ][ ][ ][ ][ ][ ][ ]
01 Approved
Securities
02 Approved
Investments
03 Deposits
04 Non-Mandated
Investments
Other Assets,
specify
05
06 Total
08 Adjusted Value of
Assets:
(6) - (7)
I certify that the statement has been prepared in accordance with Schedule I.
Notes: The statement shall show the value of the above-mentioned categories of assets
in accordance with Regulation 2 in Schedule I.
Schedule II-A
(See Regulation 4)
a. (a) “valuation date”, in relation to an actuarial investigation, means the date to which
the investigation relates.
a. (b) “universal life contracts” means those contracts that are presented in an
unbundled form. The contracts where policyholders have an option to invest in units of
insurer’s segregated fund(s) shall be treated as “linked business”; and others shall be
treated as “non-linked business”.
The valuation method shall take into account all prospective contingencies under which any
premiums (by the policyholder) or benefits (to the policyholder/beneficiary) may be payable
under the policy, as determined by the policy conditions. The level of benefits shall take into
account the reasonable expectations of policyholders (with regard to bonuses, including terminal
bonuses, if any) and any established practices of an insurer for payment of benefits.
The valuation method shall take into account the cost of any options that may be available to the
policyholder under the terms of the contract.
The determination of the amount of liability under each policy shall be based on prudent
assumptions of all relevant parameters. The value of each such parameter shall be based on the
insurer’s expected experience and shall include an appropriate margin for adverse deviations
(hereinafter referred to as MAD) that may result in an increase in the amount of mathematical
reserves.
(i) The amount of mathematical reserve in respect of a policy, determined in accordance with
sub-para (4), may be negative (called “negative reserves”) or less than the guaranteed surrender
value available (called “guaranteed surrender value deficiency reserves”) at the valuation date.
i. (ii) The appointed actuary shall, for the purpose of section 35 of the Act, use the
amount of such mathematical reserves without any modification;
i. (iii) The appointed actuary shall, for the purpose of sections 13, 49, 64V and 64VA of
the Act, set the amount of such mathematical reserve to zero, in case of such negative
reserve, or to the guaranteed surrender value, in case of such guaranteed surrender value
deficiency reserves, as the case may be.
If in the opinion of the appointed actuary, a method of valuation other than the Gross Premium
Method of valuation is to be adopted, then, other approximations (e.g. retrospective method) may
be used.
Provided that the amount of calculated reserve is expected to be atleast equal to the amount that
shall be produced by the application of Gross Premium Method.
The method of calculation of the amount of liabilities and the assumptions for the valuation
parameters shall not be subject to arbitrary discontinuities from one year to the next.
The determination of the amount of mathematical reserves shall take into account the nature and
term of the assets representing those liabilities and the value placed upon them and shall include
prudent provision against the effects of possible future changes in the value of assets on the
ability of the insurer to meet its obligations arising under policies as they arise.
3. Policy Cash Flows.--- The gross premium method of valuation shall discount the
following future policy cash flows at an appropriate rate of interest,---
a. 4. Policy Options. –Where a policy provides built-in options, that may be exercised
by the policyholder, such as conversion or addition of coverage at future date(s)
without any evidence of good health, annuity rate guarantees at maturity of contract,
etc., the costs of such options shall be estimated and treated as special cash flows in
calculating the mathematical reserves.
(a) The value(s) of the parameter shall be based on the insurer’s experience study, where
available. If reliable experience study is not available, the value(s) can be based on the industry
study, if available and appropriate. If neither is available, the values may be based on the bases
used for pricing the product. In establishing the expected level of any parameter, any likely
deterioration in the experience shall be taken into account;
(b) The expected level, as determined in clause (a) of this sub-para, shall be adjusted by an
appropriate Margin for Adverse Deviations (MAD), the level of MAD being dependent on the
degree of confidence in the expected level, and such MAD in each parameter shall be based on
the Guidance Notes issued by the Actuarial Society of India, with the concurrence of the
Authority
(c) The values used for the various valuation parameters should be consistent among themselves.
(2) Mortality rates to be used shall be by reference to a published table, unless the insurer has
constructed a separate table based on his own experience:
Provided that such published table shall be made available to the insurance industry by the
Actuarial Society of India, with the concurrence of the Authority.
Provided further that such rates determined by reference to a published table shall not be less
than hundred per cent. of that published table.
Provided further that such rates determined by reference to a published table may be less than
hundred per cent. of that published table if the appointed actuary can justify a lower per cent.
(3) Morbidity rates to be used shall be by reference to a published table, unless the insurer has
constructed a separate table based on his own experience:
Provided that such published table shall be made available to the insurance industry by the
Actuarial Society of India, with the concurrence of the Authority:
Provided further that such rates determined by reference to a published table shall not be less
than hundred per cent. of that published table.
Provided further that such rates determined by reference to a published table may be less than
hundred per cent. of that published table if the appointed actuary can justify a lower per cent.
(4) Policy maintenance expenses shall depend on the manner, in which they are analysed by
the insurer, viz., fixed expenses and variable expenses. The variable expenses shall be related to
sum assured or premiums or benefits. The fixed expenses may be related to sum assured or
premiums or benefits or per policy expenses. All expenses shall be increased in future years for
inflation, the rate of inflation assumed should be consistent with the valuation rate of interest.
a. (a) shall be not higher than the rates of interest, for the calculation of the
present value of policy cash flows referred to in para 4, determined from prudent
assessment of the yields from existing assets attributable to blocks of life insurance
business, and the yields which the insurer is expected to obtain from the sums
invested in the future, and such assessment shall take into account ---
i. (i) the composition of assets supporting the liabilities, expected cash flows
from the investments on hand, the cash flows from the block of policies to be
valued, the likely future investment conditions and the reinvestment and
disinvestment strategy to be employed in dealing with the future net cash flows;
i. (ii) the risks associated with investment in regard to receipt of income on such
investment or repayment of principal;
i. (iii) the expenses associated with the investment functions of the insurer;
a. (b) shall not be higher than, for the calculation of present value of policy cash
flows in respect of a particular category of contracts, the yields on assets
maintained for the purpose of such category of contacts;
a. (e) in respect of single premium business, shall take into account the effect of
changes in the risk-free interest rates.
(6) Other parameters, may be taken into account, depending on the type of policy. In
establishing the values of such parameters, the considerations set out in this Schedule shall be
taken into account.
As regards the business ceded by insurers, this Schedule shall be applicable to the net sums at
risk retained by the insurer.
(3) Reinsurance arrangement with an element of borrowing in the form of deposit or credit of
any kind from insurer’s reinsurers without the prior approval of the Authority shall not be treated
as credit for reinsurance for the purpose of determination of required solvency margin.
7. Additional Requirements for Linked Business.—(1) Reserves in respect of linked
business shall consist of two components, namely, unit reserves and general fund reserves.
(2) Unit reserves shall be calculated in respect of the units allocated to the policies in force at the
valuation date using unit values at the valuation date.
(3) General fund reserves (non-unit reserves) shall be determined using a prospective valuation
method set out in this Schedule, which shall take into account of the following, namely:-
(a) Policies in respect of which extra premiums have been charged on account of underwriting of
under-average lives that are subject to extra risks such as occupation hazard, over-weight, under-
weight, smoking history, health, climatic or geographical conditions;
a. (b) Lapses policies not included in the valuation but under which a liability
exists or may arise;
b. (c) Options available under individual and group insurance policies;
c. (d) Guarantees available to individual and group insurance policies;
d. (e) The rates of exchange at which benefits in respect of policies issued in
foreign currencies have been converted into Indian Rupees and what provision has
been made for possible increase of mathematical reserves arising from future
variations in rates of exchange;
e. (f) Other, if any.
i. 9. Statement of Liabilities-- An insurer shall furnish a statement of liabilities in
accordance with the Insurance Regulatory and Development Authority (Actuarial
Report and Abstract) Regulations, 2000.
Schedule II-B
(See Regulation 4)
(b) reserve for outstanding claims shall be determined in the following manner:-
where the amounts of outstanding claims of the insurers are known, the amount is to be provided
in full;
where the amounts of outstanding claims can be reasonably estimated according to the insurer,
he may follow the 'case by case method' after taking into account the explicit allowance for
changes in the settlement pattern or average claim amounts, expenses and inflation;
(c) reserve for claims incurred but not reported (IBNR) shall be determined using
actuarial principles. In such determination, the appointed actuary shall follow the
Guidance Notes issued by the Actuarial Society of India, with the concurrence of the
Authority, and any directions issued by the Authority, in this behalf.
Insurance Regulatory and Development Authority (IRDA) has announced fresh investment
guidelines that seek to create a level playing field between private players and LIC (Life
Insurance Corporation). The biggest impact of these guidelines will be on LIC. Earlier LIC was
allowed to hold up to 30% of stake in any company but now it may be able hold only up to 10%.
It may have to dilute stake in companies where holding is more than 10%. LIC currently holds
more than 10% in companies such as Ranbaxy,Mahindra, L&T.
Insurance companies can now invest upto 5% in liquid funds. According to the new insurance
rules, companies can now invest in mortgage-backed securities, bonds floated by SEZs and
liquid funds. Mutual Fund companies may see upto Rs 52,000 crore coming in from insurance
companies for liquid funds.
The Insurance Regulatory and Development Authority (Irda) has liberalised norms for equity
investment by insurers. The scope of investment has thus, been expanded to “equity shares other
than those classified as thinly traded” as per the mutual fund guidelines of the Securities and
Exchange Board of India (Sebi), informed sources said.
The authority had earlier amended the original regulations to elaborate on the type of equity
investments allowed. The permissible “actively traded and liquid instruments” had been defined
as those whose “trading volume does not fall below 10,000 units in any trading session during
the last 12 months or trading value of which exceeds Rs 10 lacs in any trading session during last
12 months”.
The move came recently in the wake of requests from insurance companies that the investment
regulations were too restrictive in view of the paucity of sufficient avenues on the lines of those
stipulated.
While a number of new companies, like Max New York Life and ING Vysya Life have taken a
policy decision to steer clear of equity investments as of now, others are quite bullish despite the
10 per cent cap on their investment in any one company, group or sector. The public sector
insurers too have been investing in equity within the specified norms.
According to the first Irda annual report, the Life Insurance Corporation had in 2000-01 invested
a total of Rs 193,283 crore, of which nearly 10 per cent or Rs 1,8577 crore was in “other than
approved investments”. In the same year, six new life insurance players launched operations
from December onwards. In the limited remaining period of that fiscal, only two of them
invested in such instruments — Birla SunLife Rs 4.55 crore out of a total of Rs 104.34 crore and
O M Kotak Life Rs 2.33 crore out of an aggregate Rs 152.25 crore.
The others put their investible funds into government and other approved securities,
infrastructure and “approved investments”. HDFC Standard Life had a total investment of Rs
156.32 crore, Max New York Life Rs 72.27 crore, ICICI Prudential Rs 124.67 crore and Tata
AIG Life Rs 116.76 crore. Among general insurers, the five public sector companies together
invested Rs 3,737.24 crore in “other than approved” instruments. Of the four newly licensed
play’s, only one — Reliance General — invested Rs 24 crore in the equity segment out of a total
Rs 97.5 crore. The total investment by Royal Sundaram in the period was Rs 81.98 crore, Iffco-
Tokio Rs 105.11 crore and Tata AIG General Rs 108.7 crore.
11. Names of all life and non-life insurance companies
registered in India, their punch lines and websites
http://www.iloveindia.com/finance/insurance/companies/index.html
In India, Insurance is a national matter, in which life and general insurance is yet a
booming sector with huge possibilities for different global companies, as life insurance
premiums account to 2.5% and general insurance premiums account to 0.65% of India's
GDP. The Indian Insurance sector has gone through several phases and changes,
especially after 1999, when the Govt. of India opened up the insurance sector for private
companies to solicit insurance, allowing FDI up to 26%. Since then, the Insurance sector
in India is considered as a flourishing market amongst global insurance companies.
However, the largest life insurance company in India is still owned by the government.
The history of Insurance in India dates back to 1818, when Oriental Life Insurance
Company was established by Europeans in Kolkata to cater to their requirements.
Nevertheless, there was discrimination among the life of foreigners and Indians, as higher
premiums were charged from the latter. In 1870, Indians took a sigh of relief when
Bombay Mutual Life Assurance Society, the first Indian insurance company covered
Indian lives at normal rates. Onset of the 20th century brought a drastic change in the
Insurance sector.
In 1912, the Govt. of India passed two acts - the Life Insurance Companies Act, and the
Provident Fund Act - to regulate the insurance business. National Insurance Company
Ltd, founded in 1906, is the oldest existing insurance company in India. Earlier, the
Insurance sector had only two state insurers - Life Insurers i.e. Life Insurance
Corporation of India (LIC), and General Insurers i.e. General Insurance Corporation of
India (GIC). In December 2000, these subsidiaries were de-linked from parent company
and were declared independent insurance companies: Oriental Insurance Company
Limited, New India Assurance Company Limited, National Insurance Company Limited
and United India Insurance Company Limited.
http://www.investopedia.com/terms/r/reinsurance.asp
The party that diversifies its insurance portfolio is known as the ceding party. The party
that accepts a portion of the potential obligation in exchange for a share of the insurance
premium is known as the reinsurer.