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10-12-2012 Aparna.  Nature of Life Insurance Business  Role of Actuarial function  Roles needing actuarial skills in L. I. Co.  Types Of Life Ins.

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Presentation on theme: "10-12-2012 Aparna.  Nature of Life Insurance Business  Role of Actuarial function  Roles needing actuarial skills in L. I. Co.  Types Of Life Ins."— Presentation transcript:

1 Aparna

2  Nature of Life Insurance Business  Role of Actuarial function  Roles needing actuarial skills in L. I. Co.  Types Of Life Ins Products  Product Pricing  Profit measures  Reinsurance  Valuation Of Liabilities  Gross Premium Reserve: New GNs  Availability of assets to cover liabilities  Evaluating worth of the company  Projecting the capital requirement  Professional responsibilities  Implications of IFRS  M/S K. A. Pandit

3  Long term in nature  Usually increasing risk  Level premiums lead to accumulations of Funds  Investment strategy to ensure security and obtain optimal return

4 Chief Actuary Regulatory Authority Shareholders Policy Holders Competitors Professional Bodies

5  Product Pricing  Reinsurance arrangements  Valuation of liabilities  Evaluating worth of the company  Projecting the capital requirement  Asset Liability Management  Professional responsibilities

6  Conventional With Profit (Participating)  Conventional Without Profit (Non-Participating)  Unit Linked With Profit  Unit Link Without Profit  Unitised with Profit  Universal Life  Unitised Without Profit  Critical Illness  Income Benefit  Surgical Riders  Group Products e.g. group term insurance

7 Different Methods of Pricing:  Cash-flow method  Formula Method

8 Pricing basis includes :  Mortality  Morbidity  Investment return  Expense inflation  Tax & duty  Withdrawal  Statutory basis  Expenses : initial, renewal

9 Pricing basis includes :  Rate of return required by shareholders  Spilt of profits between shareholders & policyholders  Reinsurance arrangements

10  NPV  IRR  Discounted Payback period

11  Find a credit worthy reinsurer acceptable by the regulatory authority  Treaty arrangements for all / some products  Decide the retention limits for various products considering the risk appetite of the company  Get competitive rates  Help in product pricing & structuring esp. in new products  Different types of reinsurance arrangements : quota share, risk premium, financial reinsurance etc.

12  Accurate and complete data of all policies issued  Evaluation of accrued liability based on appropriate estimates of uncertainties including:  Mortality  Morbidity  Investment return  Expense inflation  Expenses : initial, renewal  Withdrawals (if allowed)  All on prudent basis ( Best estimate + MAD)  Additional provisions for contingencies Statutory basis

13  In line with the RBC requirements  Non ULIP products by GPM  ULIP liabilities are Unit Fund value + non- unit liability  GPM to use prospective method, policy by policy valuation  GPM to use prudent assumptions: Best estimate + MAD  Explicit allowance for future bonuses incl. terminal bonus is required  Option & Guarantees to be reserved for explicitly  Min reserve is max (Zero, Guaranteed SV)  Assumptions are on latest experience & future expectations  Need of experience analysis especially for expenses  Reserves net of reinsurance. i.e. full credit for reinsurance  Additional reserves for: EMR cases, lapsed policies, IBNR etc.

14  Admissibility of assets is as per the definition of IBSL regulations  Asset values normally worked out by Company and audited by Auditors  Life Fund worked out after deduction of actual other liabilities and provision  Adequacy of Life Fund to cover estimates of liabilities  Determining excess of life Fund over liabilities

15  Through Embedded value (EV) and Appraisal value.  EV = PV(future profits from IF buz.) + shareholders’ share of estate  EV is on Best estimate basis  Appraisal Value = EV + value of expected new business of co.  Used for valuing the shares of the company when listed  Takeover/ amalgamation

16  To ensure the solvency of the company at all times on statutory basis  Solvency margin usually prescribed by Supervisors as per Insurance Act or Regulations.  Additional capital required in case of shortfall  Excess if any over solvency margin can be distributed among shareholders and policyholders as provided by regulations  Writing new business  Expansion plans

17  Making sure PRE are met  Treat Customers Fairly  Whistle blowing role  Risk manager  Be professional without prejudice towards shareholders/ policyholders

18  Prescribed methodology for valuation of assets  Methodology for valuation of liabilities  Realistic valuations may result in changes of values every accounting period  Drastic fluctuations to be taken care of

19  Pricing  Valuation  Peer Review  LAT  ALM  Evaluating worth of company  Use of internationally used actuarial software: Prophet  Clientele across the globe

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