Exposure Draft on IRDAI (Appointed Actuary) Regulations, 2017

EXPOSURE DRAFT

Ref: IRDA/ACTL/REGN/2016-17 Date:13-02-2017

Exposure Draft on IRDAI (Appointed Actuary) Regulations, 2017

Based on the experience gained, since the last amendment effected in the year 2013, the Authority felt that there is a need to amend the IRDA (Appointed Actuary), Regulations, 2000. The basic framework for appointment of Appointed Actuaries and their duties, functions etc. is prescribed in the aforementioned Regulations.

The draft of IRDAI (Appointed Actuary), Regulations, 2017 contains the following key changes to the earlier Regulations, amongst the others:

1.Short Title & Commencement

The draft regulations shall supersede the existing IRDA (Appointed Actuary) Regulations, 2000 and also amendments made thereon in 2013.

2. Definitions

The following definitions were added:

Definition of “Actuary”,” Resident in India” and Institute of Actuaries of India

3. Procedure of Appointment of an Appointed Actuary

Ø A fellow member or an affiliate member in accordance with Actuaries Act 2006

Ø A person with 5 years of post-qualification experience.

Ø Post qualification experience should be relevant for nature, scale and complexity of the business.

Ø Must have worked for at least one year for statutory valuation.

Ø The Chairperson of the Authority will issue guidelines from time to time regarding the transitory arrangement available to the insurer so that the statutory work doesn’t get hampered.

5. No insurer will work without an AA.

8.Duties & Obligations

General Provisions:

ü Availability of all the records with the AA to conduct actuarial valuation of liabilities and assets of the insurer.

ü Expression of opinion by AA on underwriting policy, reinsurance arrangements & effective implementation of risk management systems

ü If an AA is disqualified to act as an Actuary, he/she ceases to be an AA forthwith

ü Reference to pay due regard to generally accepted Actuarial principles while carrying out any task

Life Insurance Business:

Provisions related to Mathematical reserves, methodologies and underlying models, sufficiency and quality of data, and reliability and accuracy of mathematical reserves.

General Insurance Business:

To ensure that premium rates of the insurance products are fair.Provisions related to IBNR, methodologies and underlying models, sufficiency and quality of data, and reliability and accuracy of IBNR.

You are requested to offer your comments/ suggestions on the proposed regulations for consideration of the same by the Authority. The comments/ suggestions in MS-WORD format (Annexure-1) should be sent by e-mail to pankajk.tewari [at] irda [dot] gov [dot] in with a copy to shyama [at] irda [dot] gov [dot] in latest by 28^th February, 2017.

S.P. Chakraborty

GM (Actuarial)

Annexure-I

Format for furnishing comments

Name of the Stakeholder: _____________.

Sl.No.Regulation No. & Sub Regulation No.Comments/Change suggestedRationale/reasons for Comments/suggestion

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA

Exposure Draft

Insurance Regulatory and Development Authority of India (Appointed Actuary) Regulations, 2017

In exercise of the powers conferred by section 114A of the Insurance Act, 1938 (4 of 1938), read with sections 14 and 26 of Insurance Regulatory and Development Authority Act,1999 (4 of 1999), the Authority in consultation with the Insurance Advisory Committee, hereby makes the following regulations, namely: –

1. Short title and commencement. —-

(1) These regulations may be called the Insurance Regulatory and Development Authority of India (Appointed Actuary) Regulations, 2017.

(2) These regulations replace the “Insurance Regulatory and Development Authority (Appointed Actuary) Regulations, 2000.

(3) They shall come into force from the date of their publication in the Official Gazette.

2. Definitions.-

(1)In these regulations, unless the context otherwise requires —-

(i) “Act” means the Insurance Act, 1938 (4 of 1938) ;

(ii) “Actuary” means an actuary as defined in clause (a) of sub-section (1) of section 2 of Actuaries Act 2006;

(iii) “Appointed Actuary” means an actuary mentioned in Regulation 3 below;

(iv) “Authority” means the Insurance Regulatory and Development Authority of India established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);

(v) “Institute of Actuaries of India ” means a statutory body established under Section 3 of The Actuaries Act 2006 (35 of 2006) for regulation of profession of Actuaries in India.

(vi) “Professional Standard” means the standard of practice specified by the Institute of Actuaries of India by issue of guidance notes/Actuarial Practice Standard to its members.

(vii) “Resident in India” means any individual as defined in Section 6 subsection (1) of Income Tax Act 1961.

(2) All words and expressions used herein and not defined herein but defined in the Insurance Act, 1938 (4 of 1938), or in the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), shall have the meanings respectively assigned to them in those Acts.

3. Procedure for Appointment of an Appointed Actuary. —

(1) An insurer registered to carry on insurance business in India shall, subject to sub-regulation (2) and sub-regulation (5) appoint an actuary, who shall be known as the ‘Appointed Actuary’ for the purposes of the Act.

(2) A person shall be eligible to be appointed as an appointed actuary for an insurer, if he or she shall be:

(i) Ordinarily resident in India

(ii) A Fellow member or an Affiliate member in accordance with the Actuaries Act,2006

(iii) The Fellow member or an Affiliate member should have specialization (as evidenced by qualification and/or working experience) in:

a. Life Insurance for Life insurer / Life reinsurer

b. General insurance for General insurer / General reinsurer

c. Health insurance for Stand-alone Health insurer/ Health reinsurer

Provided, however, the syllabus and reading material constituting element of study for such specialization and requirements for issuing the certificate of practice for Appointed Actuary shall be to the satisfaction of the Authority.

(iv) A person with 5 years of post-qualification experience.

(v) The above post qualification experience should be relevant for the nature, scale and complexity of the risks inherent in the insurer’s business for whom the application for the Appointed Actuary is being made. Such relevant experience should be demonstrable with applicable professional and other standards and should include the work relating to annual statutory valuation for at least one year.

(vi) An employee of the insurer.

(vii) A person who has not committed any breach of professional standard/other misconduct.

(viii) A person against whom no disciplinary action by the Institute of Actuaries of India or any other actuarial professional body is pending;

(ix) Not an appointed actuary of another insurer;

(x) A person who possesses a Certificate of Practice issued by the Institute of Actuaries of India

(xi) Not over the age of 65 years.

(3) An insurer shall seek the approval of the Authority for the appointment of appointed actuary, submitting the application in Form IRDA AA-1

(4) The Authority shall, within thirty days from the date of receipt of application, either accept or reject the same:

Provided that before the rejecting the application, the Authority shall give an opportunity of being heard to the insurer.

(5) An insurer, who is unable to appoint an appointed actuary in accordance with sub-regulation (2), shall make an application to the Authority in writing for relaxation of conditions. The Chairperson of the Authority shall issue guidelines from time to time regarding the transitory arrangement available for the insurer, so that the statutory work does not get hampered.

(6) The appointment of an appointed actuary shall take effect on or after the date of approval by the Authority.

4. Effect of rejection of the application.-–The insurer shall, within four weeks of rejection of the application referred to under regulation 3, apply to the Authority for the appointment of a person other than the one rejected by it under regulation 3 as an appointed actuary, for the purposes of these regulations.

5.No Insurer shall carry on business of insurance without an Appointed Actuary. However, in case an insurer does not have Appointed Actuary, the Chairperson of the Authority will issue guidelines from time to time regarding the transitory arrangement available for the insurer, so that the statutory work does not get hampered.

6. Cessation of Appointment of Appointed Actuary.-

(1) An appointed Actuary shall cease to be so, if he or she has been given notice of withdrawal of approval by the Authority on the following grounds:-

(a) that he or she ceases to be eligible in accordance with sub-regulation (2) of regulation(3), or;

(b) that he or she has, in the opinion of the Authority, failed to perform adequately and properly the duties and obligations of an appointed actuary under these regulations.

(2) The Authority shall give an Appointed Actuary a reasonable opportunity of being heard, if he or she has been given a notice of withdrawal of approval by the Authority.

(3) If a person ceases to be an appointed actuary of an insurer otherwise than on the grounds mentioned in sub-regulation (1), the insurer and the appointed actuary shall intimate the Authority the reasons there for within one week of such a cessation.

7. Powers of Appointed Actuary.–(1) An appointed actuary shall have access to all information or documents in possession, or under control, of the insurer if such access is necessary for the proper and effective performance of the functions and duties of the appointed actuary.

(2) The appointed actuary may seek any information for the purpose of sub-regulation (1) of this regulation from any officer or employee of the insurer.

(3) The appointed actuary shall be entitled :

(i) to attend all meetings of the management including the directors of the insurer;

(ii) to speak and discuss on any matter, at such meeting, —

(a) that relates to the actuarial advice given to the directors;

(b) that may affect the solvency of the insurer;

(c) that may affect the ability of the insurer to meet the reasonable expectations of policyholders; or

(d) on which actuarial advice is necessary;

(iii) to attend, —

(a) any meeting of the shareholders or the policyholders of the insurer; or

(b) any other meeting of members of the insurer at which the insurer’s annual accounts or financial statements are to be considered or at which any matter in connection with the appointed actuary’s duties is discussed.

8. Duties and obligations.-– In particular and without prejudice to the generality of the foregoing matters, and in the interests of the insurance industry and the policyholders, the duties and obligations of an appointed actuary of an insurer shall include:–

(i) to ensure that all the requisite records have been made available to him or her for the purpose of conducting actuarial valuation of liabilities and assets of the insurer;

(ii) rendering actuarial advice to the management of the insurer, in particular in the areas of product design and pricing, insurance contract wording, investments and reinsurance;

(iii) ensuring the solvency of the insurer at all times;

(iv) complying with the provisions of the section 64V of the Act in regard to certification of the assets and liabilities that have been valued in the manner required under the said section;

(v) Complying with the provisions of the section 64 VA of the Act in regard to maintenance of required control level of solvency margin in the manner required under the said section;

(vi) drawing the attention of management of the insurer, to any matter on which he or she thinks that action is required to be taken by the insurer to avoid–

(a) Any contravention of the Act; or

(b) Prejudice to the interests of policyholders;

(vii) Complying with the Authority’s directions from time to time;

(viii) expressing an opinion to the Board of the insurer on the overall underwriting policy;

(ix) expressing an opinion to the Board of the insurer on the adequacy of reinsurance arrangements

(x) contributing to the effective implementation of the risk management system

(xi) to comply with the provisions of section 40-B of the Act.

(xii) to comply with the provisions of section 21 of the Act in regard to further information required by the Authority;

(xiii) In the case of the insurer carrying on life insurance business,–

(a) to certify the actuarial report and abstract and other returns as required under section 13 of the Act;

(b) to comply with the provisions of the section 112 of the Act in regard to recommendation of interim bonus or bonuses payable by life insurer to policyholders whose policies mature for payment by reason of death or otherwise during the inter-valuation period;

(c) to ensure that the premium rates of the insurance products are fair;

(d) to certify that the mathematical reserves have been determined taking into account the guidance notes issued by the Institute of Actuaries of India and any directions given by the Authority;

(e) to ensure that the policyholders’ reasonable expectations have been considered in the matter of valuation of liabilities and distribution of surplus to the participating policyholders who are entitled for a share of surplus;

(f) to submit the actuarial advice in the interests of the insurance industry and the policyholders;

(g) to coordinate the calculation of mathematical reserves

(h) to ensure the appropriateness of the methodologies and underlying models used, as well as the assumptions made in the calculation of mathematical reserves

(i) to assess the sufficiency and quality of the data used in the calculation of mathematical reserves

(j) to inform the Board of insurer about the reliability and adequacy of the calculation of mathematical reserves

(xiv) in the case of the insurer carrying on general insurance business/ health insurance business to ensure, —

(a) to ensure that the premium rates of the insurance products are fair;

(b) that the actuarial principles, in the determination of liabilities, have been used in the calculation of reserves for incurred but not reported claims (IBNR) and other reserves where actuarial advice is sought by the Authority;

(c) coordinate the calculation of IBNR

(d) ensure the appropriateness of the methodologies and underlying models used, as well as the assumptions made in the calculation of IBNR

(e) assess the sufficiency and quality of the data used in the calculation of IBNR

(f) inform the Board of insurer about the reliability and adequacy of the calculation of IBNR

(xv) informing the Authority in writing of his or her opinion, within a reasonable time, whether, —

(a) the insurer has contravened the Act or any other Acts;

(b) the contravention is of such a nature that it may affect significantly the interests of the owners or beneficiaries of policies issued by the insurer;

(c) the directors of the insurer have failed to take such action as is reasonably necessary to enable him to exercise his or her duties and obligations under this regulation; or

(d) an officer or employee of the insurer has engaged in conduct calculated to prevent him or her exercising his or her duties and obligations under this regulation.

(xvi) If an Appointed actuary is disqualified to act as an Actuary, he/she ceases to exist as Appointed Actuary forthwith.

(xvii) While carrying out his/her duties and obligations, the Appointed Actuary will pay due regard to generally accepted actuarial principles and practice

9. Absolute Privilege of Appointed Actuary.—

(1) An appointed actuary shall enjoy absolute privilege to make any statement, oral or written, for the purpose of the performance of his functions as appointed actuary. This is in addition to any other privilege conferred upon an appointed actuary under any other Regulations.

(2) Any provision of the letter of appointment of the appointed actuary, which restricts or prevents his duties, obligations and privileges under these regulations, shall be of no effect.

10. Conflict of Interest

The Appointed Actuary shall function in accordance with these regulations and he/she shall not function in any other capacity which could result in conflict of interest in performing his/her role as Appointed Actuary in accordance with these Regulations.

11. Applicability to reinsurance business. — These regulations shall apply to reinsurers carrying on reinsurance business in India except branch offices of Foreign reinsurers in India.

12. Power of the Authority to issue clarifications etc.

In order to remove any doubts or difficulties that may arise in the application or interpretation of any of the provisions under these regulations, the Authority may issue appropriate clarifications or guidelines as deemed necessary. Under extraordinary circumstances, the Chairperson of Authority may issue instructions for waiver of some of the provisions under these regulations.

Form IRDA-AA-1

Particulars of Appointed Actuary

1. Name of Insurer:

2. Name of Actuary:

3. Residential Address with telephone number: [Residential addresses during the last five years have to be furnished]

3.1. Whether ordinarily resident in India?

4. Official Address with telephone number:

5. Date of Appointment:

6. Date & Place of Birth

7. Mobile No.

8. E-mail address:

7. Annual Remuneration & Fringe Benefits

8. Shareholding (in per cent. of shareholding) in the Indian Insurance Company (for which the applicant is the Appointed Actuary) and also in the promoter’s companies, if any.

9. Professional Qualifications:

10. Working Experience

11. Achievements and special positions held presently or previously:

12. Names, countries of incorporation, addresses and principal activities of any other firms or companies in which the applicant was a director, partner, proprietor or employee:

13. Particulars of any criminal conviction for offences in India or elsewhere:

14. Has the applicant been adjudicated bankrupt during the last ten years? If so, give details:

15. Has the applicant been disciplined by any professional bodies or any insurance regulator? If so give details:

Certification:

I hereby certify that the information given in this form is complete, true and correct, and also enclose the Certificate of Practice issued by the Institute of Actuaries of India. I am also enclosing self-attested copies of following documents

1. Fellowship certificate issued by the Institute of Actuaries of India

2. Latest Certificate of Practice issued by the Institute of Actuaries of India

3. Documentary evidence for subject specialisation

Place:

Date: Signature of Actuary.

Countersigned by the principal officer of the Insurer: