At Hyderabad
December 29, 2010
A.V.RAO,
R.K.Sharma,
B. Padmaja
Objective: Making use of all available sources, the
supervisory authority monitors and analyses all
factors that may have an impact on insurers and
insurance markets. It draws conclusions and takes
action as appropriate
No. of Essential Criteria: 5;
No. of Advance Criteria: 2
Crit.
Contents
Compliance
a.
Regular Analysis of
Market Conditions by
Supervisor
Performance of insurers in
terms of new business
analysed on a monthly
basis
b.
Analysis to include
 past developments,
 present situation,
 identify trends and
possible future
scenarios and issues
to enable action at an
early stage.
Business trends studied at
frequent intervals to
enable timely intervention.
Crit.
Contents
Compliance
c.
Analysis to be
 both quantitative
and qualitative
 use of both public
and confidential
sources of
information.
 Quantitative analysis - based
on the premium figures.
 Qualitative analysis - based on
market conduct issues through public/ media,
stakeholders, publicity
material of the insurer
d.
Aggregated market
data is published and
available publicly
 Aggregated market data
published in Annual Report of
IRDA
 Aggregated monthly statistics
published on the website of
IRDA, Journal
Crit.
Contents
e.
Requires market-wide
systematic reporting on
events of importance for the
financial stability of
insurance markets.
f.
Analysis not limited to
home market
g.
Compliance
Relevant market-wide information
sought as and felt necessary (Eg.,
Reports on claims settled during
Tsunami, Exposure in Satyam
Computers etc.,
Regular macro economic and insurance
scenario analysis and its impact on the
home market at both national and
international level
 Monitors trends that
 Forms part of mission statement
may impact the financial  Entire regulatory framework is
stability
geared to meet this requirement.
 Assesses
 Supervisor interacts with the other
macroeconomic risks
regulators to identify and deal with
and vulnerabilities
factors which could have systemic
adversely impinging on
implications on the sector at
prudential safeguards,
national and international level
financial stability or
being part of FSDC and FSB.
consumer interests.
Objective: The Supervisory Authority receives
necessary information to conduct effective off-site
monitoring and to evaluate the condition of each
insurer as well as the insurance market
No. of Essential Criteria: 3;
No. of Advanced Criteria: 2
Crit.
a
b
Contents
Supervisor
- Sets: submission of regular
financial and statistical
information, actuarial
reports and other
information
- Defines the scope and
frequency
- Requires audit opinion
annually
- Requires more frequent and
detailed information
whenever needed.
There is no distortion of the
market in favour of or against
any particular form of
enterprise.
(Private/public/local/foreign
etc.)
Compliance

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



Requirement prescribed in legislation on
submission of financial/statistical and
actuarial returns
Various details new business submitted
on monthly basis
Information like agency statistics, claims
settlement statistics etc., unaudited
financial statements, solvency statements
on a quarterly basis.
Strategic changes likely to affect
policyholders interests are called at
shorter intervals where found necessary
No distinction made between state
owned entities / private insurers
Foreign entities are not permitted to do
business in India.
Crit.
c
Contents
Supervisor
-Requires information on financial
condition and performance on both a
solo and a group-wide basis.
–sets out norms regarding accounting
–requires to report any off-balance
sheet exposures.
–requires report on their outsourced
functions.
–requires that the appropriate level of
an insurer’s senior management is
responsible for the timing and
accuracy of these returns.
–requires that inaccurate information
be corrected
-impose sanctions for deliberate
misreporting.
–maintains a framework for on-going
monitoring of the financial condition
and performance of the insurers.
Compliance
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




Legislations/Regulations require
submission of information on solo basis.
In case of financial conglomerates
information is collected on a group –
wide basis.
The accounting regulations require
reporting of off-balance sheet items;
compliance with Accounting Standards
of ICAI
The audited annual accounts to be signed
by the chairman and two directors and
by the principal officer of the company.
Similar requirements prevalent in case of
other returns
Penalty not exceeding ` 5 lakh for each
failure on the persons who falsify
statements in investment returns.
Various returns form the basis for off-site
monitoring
Guidelines on outsourcing of insurance
activities is presently exposed as draft for
discussions
Crit.
Contents
Compliance
d.
Supervisor reviews its  Reporting formats are reviewed
from time to time eg., forms
reporting requirements.
under the Investment
regulations, forms of reporting
of annual accounts, monthly
business numbers have been
modified.
e.
The supervisory
authority requires
insurers reporting of
material changes that
affect the evaluation of
condition.
 Regulations impose an
obligation on the insurer to
report extraordinary events
impacting the investment
portfolio
Objective: The supervisory authority carries out onsite inspections to examine the business of an
insurer and its compliance with legislation and
supervisory requirements
No. of Essential Criteria: 6
Crit.
Contents
Compliance
a.
By law supervisor
has powers to
conduct on site
inspections and
gather required
information
b.
Supervisor,
external auditors
or other experts
conduct on-site
inspections.
Legislation (Sec. 14(2)(h) of IRDA Act &
Sec. 33 of Insurance Act) empowers
IRDA to call for information and
undertaking inspection and conducting
enquiries/investigations of insurers and
(insurance) intermediaries and other
organizations connected with insurance
business.
Legislation enables appointment of an
external (qualified) person to carry out
the investigation and also specifies the
manner of reporting to the Authority.
Crit.
Contents
Compliance
c.
On-site
inspections on
full scale, or
focused basis
Both types of inspections are carried
out based on the necessity, as decided
by the competent authority.
d.
Findings are
discussed with
the insurer and
obtain
appropriate
feedback from
the insurer.
Inspection findings are shared with the
insurer, for feedback. Feedback
submitted by the insurer is examined
by IRDA before finalizing the course of
action to be taken up. Also, usually a
show cause notice is issued before any
corrective/penal action is taken.
Crit.
Contents
e.
Necessary follow up
carried out to bring
about required action of
the insurer
f.
Supervisor can extend
on-site inspections on
 intermediaries; and
companies that have
accepted functions
outsourced by the
insurer.
Compliance
After preventive/corrective action
expected from regulated entities are
communicated, based on the on-site
inspection, necessary follow-ups are
carried to ensure compliance by
obtaining written
commitments/confirmation and
further checks in follow-up
inspections.
Legislation empowers the supervisor
to extend inspection of intermediaries
and other organizations concerned
with the insurance business.
Objective: The supervisory authority supervises its
insurers on a sole and a group–wide basis.
No. of Essential Criteria : 7;
In addition there are 6 Prudential requirements
Crit.
a.
b.
Contents
Constitution of
insurance group and
financial conglomerate,
clearly defined
Compliance
-Group identified during
registration from the details
furnished.
-HLCCFM has already defined
Group, laid down the criteria
for identification of Financial
Conglomerate
•Supervisor ensures
– Compliance through
effective and efficient
financial conglomerates
group-wide supervision
monitoring mechanism.
•Supervisor co-operates
– Groups assigned to
to avoid unnecessary
regulators for monitoring
duplication.
Crit.
c.
d.
Contents
Compliance
Different supervisors
Monitored through FC monitoring
responsible for different parts mechanism
of a group or conglomerate
• Reporting format prescribed for
Adequate policies on and
Financial Conglomerates capturing
supervisory oversight of:
o Group Structure and cross
• group structure
holdings
• capital adequacy
o Capital Adequacy / Solvency
• reinsurance and risk
position
concentration
o Investments, Operating Profit,
• intra-group transactions
Net Profit Etc.
and exposures,
o Intra-Group Transactions &
• Internal control
Exposures
mechanisms and risk
• Qualitative information such as
management processes,
governance structure, auditors,
penal action and group risk profile
report also captured
Crit.
Contents
Compliance
Host supervisor avoid
Not applicable in Indian context as
e.
uncooperative behaviour
foreign holding is restricted to 26%.
with home supervisor
Supervisor requires
Exhaustive reporting formats filed
f.
insurance groups and
every quarter
financial conglomerates to
have reporting systems to
adequately meet supervisory
information demands.
Supervisor may deny or
No specific provision currently.
g.
withdraw the license when
the organizational (or group)
structure hinders effective
supervision
6 Prudential Requirements which verifies if Insurers have the ability to
fulfil their obligations as they fall due
Objective: The supervisory authority requires insurers to
disclose relevant information on a timely basis in order to
give stakeholders a clear view of their business activities
and financial position and to facilitate the understanding of
the risks to which they are exposed.
No. of Essential Criteria : 4
No. of Advanced Criteria : 1
Crit.
a.
b.
Contents
Compliance
Insurers are required to
disclose information on
their financial position
and the risks to which
they are subject.
• Public Disclosures mandated
in January 2010.
• Disclosures made on website
of the insurers on quarterly
basis and published (limited
review) in newspapers on
half yearly basis.
Information includes
quantitative and
qualitative information
The disclosures covers
financial statements, analytical
ratios, solvency, return on
investment and NPAs. etc
Crit.
c.
d.
e
Contents
Compliance
Insurers required to
Half yearly accounts are subject to
produce, at least annually,
limited review and annual accounts
audited financial statements are subject to audit - published in
newspapers and on website
Supervisor monitors
information disclosed by
insurers and takes the
necessary actions to ensure
the compliance with
disclosure requirements.
On-going monitoring is done by the
Authority.
Information includes
quantitative information of
relevant risk exposures.
Mandated disclosures cover risks to
which life and non-life insurers are
exposed to
THANK YOU