The Insurance Regulatory and Development Authority of India (Irdai) has underlined that insurance companies — life, general, health — that have completed 10 years of operations will have to appoint an independent assessor of actuarial valuation.
In order to provide an independent opinion and credibility to an insurance company’s actuarial practice standards and financial standards, the insurance regulator has put draft guidelines for independent assessment of statutory actuarial valuations.
The Insurance Regulatory and Development Authority of India (Irdai) has underlined that insurance companies — life, general, health — that have completed 10 years of operations will have to appoint an independent assessor of actuarial valuation. The insurer will have to inform the regulator of the full details of the independent assessor within one week from the date of appointment of the board.
Scope of assessment
The independent assessor will access the sufficiency and quality of the data used in the calculation of actuarial valuation of reserves and liabilities. He will have to review the methodology and assumptions underpinning the work that includes but is not limited to examining any models used for the estimation of actuarial liabilities or reserves.
The assessor will have to review whether the actuarial work has been carried out in compliance with the regulations and norms issued by the regulator and other legislative requirements. Among other things, the topics to be covered in the independent assessment of actuarial report would be opinion about adequacy and sufficiency of reserves, opinion about compliance to extant norms of the authority, data collection and verification.
Eligibility conditions
At the time of appointment, the board will have to ensure that the independent assessor is in compliance with the regulatory requirements and that there are no conflicts of interest in his appointment. The rules will be applicable from March 31, 2018.
The independent assessor should be a fellow member of the Institute of Actuaries of India and should hold a Certificate of Practice in the relevant subject issued by the Institute of Actuaries of India. The independent assessor reviewing the actuarial valuation of insurance companies should have at least 10 years of relevant experience.
The independent assessor should have have access to additional resources to carry out the actuarial valuation review work and should have access to expert opinion. He should not be an employee or a board member of any insurance company in the country.
The independent assessor should not assess the actuarial valuation of more than three insurers within any financial year.
Report and compliance
The independent assessor will submit a written report on the assessment of actuarial valuation to the board of the insurer. A formal presentation by the independent assessor to the board will have to be given in addition to the written report.
A copy of the report will have to be sent to the regulator along with year-end financial reports within 15 days from the adoption of annual accounts by the board of directors of the insurer. Analysts say the insurance regulator’s draft guidelines on independent assessment of statutory actuarial valuation will prove the much-needed comfort and clarity to the board of the insurance companies and even to the regulator about credibility and fairness in determination of insurance liabilities.
