10-12-2012
Aparna
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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
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Long term in nature
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Usually increasing risk
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Level premiums lead to accumulations of Funds
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Investment strategy to ensure security and obtain
optimal return
Shareholders
Chief
Actuary
Policy
Holders
Professional
Bodies
Regulatory
Authority
Competitors
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Product Pricing
Reinsurance arrangements
Valuation of liabilities
Evaluating worth of the company
Projecting the capital requirement
Asset Liability Management
Professional responsibilities
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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
Different Methods of Pricing:
 Cash-flow method
 Formula Method
Pricing basis includes :
 Mortality
 Morbidity
 Investment return
 Expense inflation
 Tax & duty
 Withdrawal
 Statutory basis
 Expenses : initial, renewal
Pricing basis includes :
 Rate of return required by shareholders
 Spilt of profits between shareholders & policyholders
 Reinsurance arrangements
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NPV
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IRR
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Discounted Payback period
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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.
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Accurate and complete data of all policies issued
Evaluation of accrued liability based on appropriate
estimates of uncertainties including:
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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
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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.
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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
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Through Embedded value (EV) and
Appraisal value.
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EV = PV(future profits from IF buz.) +
shareholders’ share of estate
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EV is on Best estimate basis
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Appraisal Value = EV + value of expected new business of co.
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Used for valuing the shares of the company when listed
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Takeover/ amalgamation
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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
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Writing new business
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Expansion plans
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Making sure PRE are met
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Treat Customers Fairly
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Whistle blowing role
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Risk manager
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Be professional without prejudice towards shareholders/
policyholders
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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
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Pricing
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Valuation
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Peer Review
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LAT
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ALM
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Evaluating worth of company
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Use of internationally used actuarial software: Prophet
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Clientele across the globe