1. Falling Interest Rates
12th Seminar on Current Issues in Life Assurance (CILA)
Falling Interest Rates
Conclusions
20 February 2017
Mumbai
Indian Actuarial Profession
Serving the Cause of Public Interest

2. Where will interest rates be in two-three years’ time?
Question 1
Where will interest rates be in two-three years’ time?
Around the same as of now
Lower but not mature market levels
Mature market levels
Higher

3. One of the biggest challenge
Question 2
Are falling interest rates currently the biggest challenge being faced by the life insurance industry in India?
Yes No
One of the biggest challenge

4. No – India has its own unique challenges
Question 3
Are there learnings from other global markets on how to tackle the issue?
Yes - Definitely
No – India has its own unique challenges
Some – Need customized solutions

5. Profit margins / Required expense efficiencies Product mix
Question 4
Which of the following areas will be most impacted by falling interest rates?
Investment strategy
Profit margins / Required expense efficiencies
Product mix
Risk management
Insurance company valuations

6. Non-participating savings Protection Annuity
Question 5
Which product class will become increasingly relevant in case of falling interest rates?
Unit-linked
Participating
Non-participating savings
Protection
Annuity

7. Non-participating savings Protection Annuity
Question 6
Which product class will become increasingly irrelevant in case of falling interest rates?
Unit-linked
Participating
Non-participating savings
Protection
Annuity

8. Question 7
Which asset class is expected to see the highest incremental future investments due to falling interest rates?
Corporate bonds
Infrastructure bonds
Equities
Others

9. Operationalisation of ERM framework Use of derivatives Others
Question 8
From a risk management perspective, which is the key actionable due to falling interest rates?
Enhanced ALM
Operationalisation of ERM framework
Use of derivatives
Others

10. Question 9
Do you see Indian life insurers struggling for solvency if interest rates reached mature market levels in the short to medium term?
Yes No
Maybe

11. Effective risk management
Question 10
What should be the regulator’s primary focus in a falling interest rate scenario?
Solvency
Customer protection
Investments
Effective risk management