Technical Session II - Satyan Jambunathan.ppt

ICICI PRUDENTIAL LIFE INSURANCE

1. December 29, 2010

Satyan Jambunathan
Prudential requirements
A Life industry perspective

2. The supervisory authority requires
insurers to recognise the range of
risks that they face and to assess
and manage them effectively
ICP 18 Risk assessment and
management
2

3. 3
Defining distributions and shocks
Measurement of diversification benefits
Lack of data to define Op risk distributions
Challenges
Recognition of individual risks
Introduction of corporate governance
guidelines
Board and group level oversight
Move to computing risk based capital
Varying levels of progress in industry
Current
Need for industry to
Implement enterprise risk management
Formally articulate risk appetite
Implement robust measurement and
review mechanisms
Use risk based regulatory capital to drive
adoption
Desired
ICP 18 Risk assessment and
management

4. Since insurance is a risk taking
activity, the supervisory authority
requires insurers to evaluate and
manage the risks that they
underwrite, in particular through
reinsurance, and to have the tools
to establish an adequate level of
premiums
ICP 19 Insurance activity
4

5. 5
NoneChallenges
Product approval process of IRDA
Reinsurance review process of IRDA
Ongoing submissions to IRDA
Current
As above
Desired
ICP 19 Insurance activity

6. The supervisory authority requires
insurers to comply with standards for
establishing adequate technical
provisions and other liabilities, and
making allowance for reinsurance
recoverables. The supervisory authority
has both the authority and the ability to
assess the adequacy of the technical
provisions and to require that these
provisions be increased, if necessary
ICP 20 Liabilities
6

7. 7
NoneChallenges
Regulations on valuation of liabilities
Annual review of the ARA and AA report
Professional guidance
Requirement for resilience testing
Peer review
Current
As above
Audit of valuation of liabilitiesDesired
ICP 20 Liabilities

8. The supervisory authority requires
insurers to comply with standards
on investment activities. These
standards include requirements on
investment policy, asset mix,
valuation, diversification, asset-
liability matching, and risk
management
ICP 21 Investments
8

9. 9
NoneChallenges
Regulations on
Asset class limits
Exposure limits
Process including segregation of duties
Valuation of assets
Audit and review mechanisms
ALM in varying stages of development
Current
As above
Desired
ICP 21 Investments

10. The supervisory authority requires
insurers to comply with standards
on the use of derivatives and
similar commitments. These
standards address restrictions in
their use and disclosure
requirements, as well as internal
controls and monitoring of the
related positions
ICP 22 Derivatives and similar
commitments
10

11. The supervisory authority requires
insurers to comply with the
prescribed solvency regime. This
regime includes capital adequacy
requirements and requires suitable
forms of capital that enable the
insurer to absorb significant
unforeseen losses
ICP 23 Capital adequacy and
solvency
11

12. 12
Need for professional guidance on risk based
capital
Calibrations of stresses appropriate to Indian
conditions
Challenges
Factor based approach
Some allowance for risk in product lines
Limited forms of capital
Scenario testing on projections - FCR
Adequately prudent levels of capital
requirement
Current
As above
Greater allowance for risks specific to entitiesDesired
ICP 23 Capital adequacy and
solvency

13. Thank you
13