Solutions for Insurance & Risk Management Topics

Topics
1. Riders
2. Third Party Administrators
3. CAT bonds
4. Mathematical reserves
5. Law of large numbers
6. Incurred But Not Reported claims
7. Social and rural sector obligations of insurance
8. Bancassurance
9. Investment guidelines- Asset Liability and Solvency margins of IRDA
10. Investment norms
11. Names of all life and non-life insurance companies registered in India, their punch
lines and websites
12. Reinsurance
13. Globalization of insurance (penetration, density, catastrophe especially Japan case)
14. Indemnity and application of its corollaries
15. Insurance is a business of probability and large numbers
16. All principles and corollaries
17. Twin financial objectives of insurance
18. Problem of duality
19. Prepare at least 5 life and non-life products (About the product, covered and excepted
perils, calculation of premium, claim settlement, and statistics if available and marketing
strategy used by the company for this product)
20. Enterprise Risk Management

“The ones in Bold are contained into this document, & hope for the rest to be completed
soon…… “

- Khalid
Centre for Management Studies
Jamia Millia Islamia
New Delhi
 1. Riders
http://www.moneycontrol.com/insurance/riders.php

Riders are the additional benefits that you may buy and add to your policy. They are options that allow
you to enhance your insurance cover, qualitatively and quantitatively. Riders can be mixed and matched
based on one’s preferences for a small additional cost. As ‘one size fits all’ approach does not apply to
insurance it makes sense to cover risk based on factors that are unique to you. Simply put, these are
add-on benefits attached to policies in case of eventualities.
Here are a few riders and what they generally cover :
Level term cover rider
• This provides you the option to enhance your risk cover for a limited period, up to a
maximum of the sum assured on your base policy.
• It solely offers death benefit and helps the survivors to meet any unforeseen expenses that
need to be taken care of, or some liabilities to be cleared of in event of death of the policyholder.
• For example - Your need for life insurance cover is Rs 10 lakh. If you take a policy for a sum
assured of Rs 10 lakh, you would have to pay a high premium whereas if you go in for a Rs 5
lakh life cover, and add a term rider for Rs 5 lakh, you can satisfy your insurance requirement at a
far lower premium. Although, the survival benefits will be proportionately lower in this case, the
basic need for life insurance is met at a far lower cost.
Double sum assured rider
• This provides for an additional amount equivalent to the basic sum assured to the survivors in
case of an unfortunate death of the policyholder
• With a little extra premium the policyholder can double his life cover at a nominal cost as
compared to opting for a larger endowment policy.
• It is commonly found that the policyholder is the main source of income of the family and in case
of an unforeseen event of his death, his survivors are likely to need more money to manage the
household, thus the double sum assured rider caters to such a situation.

Critical illness rider or dreaded disease rider

• This rider is added to a life insurance policy to protect the insured in the event of a critical
illness.
• Generally, the extra cover is equal to the sum assured on the base policy and is paid upon
diagnosis of the illness.
• While the illnesses covered and the premiums vary among insurers, most insurers cover
cancer, coronary artery bypass, heart attack, kidney/renal failure, major organ transplant and
paralytic stroke.
• Before adding this rider one must check illnesses covered and the exclusions.
• And, a few insurers terminate the base policy once a claim is made on the rider. Thus, a
plan that continues to give you life cover, at marginally higher premium on the rider, is preferable.
• The main difference between a critical illness benefit and a mediclaim policy is that under
the critical illness benefit the policy holder gets an amount equal to the sum assured irrespective
of the medical expenses on diagnosis of the critical illness while under a mediclaim policy the
policy holder receives a reimbursement on producing the bills which is limited to the extent of
amount medical expenses incurred.
• The premium paid for this rider qualifies for tax deduction under section 80D of the IT Act

Major surgical assistance benefit

• This rider provides financial support in the event of medical emergencies that require
surgery in addition to the base policy.
• When this clause is triggered, a part of the sum assured is paid to the policyholder.
• You must check the list of surgical procedures covered and the exclusions.
 • Most insurers exclude claims arising from pre-existing injuries or illnesses and other
predefined specific events
• Also, expenses on hospitalisation for ailments that do not require surgery are not covered.
• The premium paid for this rider qualifies for tax deduction under section 80D of the IT Act
• The premium varies in a large range because only some insurers allow the base policy to
continue once a claim is made on the rider.

Accident and disability benefit

• This provides for an additional cover on the base policy, in the event of accidental death to
cover the risk of your becoming disabled–either permanently or temporarily, totally or partially–
following an accident.
• In case, the accident results in total and permanent disability, the rider provides for other
benefits: a proportion of the benefits will be paid to the insured person every year until he
recovers.
• Some insurers provide a waiver of premium benefit as well, in the event of disability; a few
insurers offer a clause that provides for compensation in the event of accidental dismemberment.
Waiver of premium rider
• This rider is triggered when the insured person becomes "completely disabled" or loses his
source of revenue because of unemployment owing to an injury or sickness.
• Thereby, the premiums due on the base policy (and other riders, if any) are waived till the
person is able-bodied and employed again.
• Effectively, this rider acts as a "disability insurance" against your life insurance policy.
• The merits of this rider are evident, particularly if the premium on the policy is high. Without this,
you are at risk of seeing your policy lapse if you don’t pay the premium owing to financial difficulty
in the event of your becoming disabled.
• The definition of the term "completely disabled" varies between insurers.
• The premium for this rider depends on the premium on the base policy and on other riders. The
higher the premium on the base policy, and the more the riders you add, the higher will be the
premium you pay on this rider.
• The premium paid for this rider qualifies for tax deduction under section 80D of the IT Act
Guaranteed insurability option rider
• This rider gives you the right to purchase additional insurance (of the nature of your base
policy) at different stages, without further medical examination.
• This rider is useful if you need to buy additional insurance to keep pace with changing life
circumstances–as when you get married or have children.
• And, even though your health condition may deteriorate with age, you don’t have to give any
medical evidence of insurability.
2. Third Party Administrators
http://en.wikipedia.org/wiki/Third-party_administrator

A Third Party Administrator (TPA) is an organization that processes insurance claims or

certain aspects of employee benefit plans for a separate entity.[1] This can be viewed as
"outsourcing" the administration of the claims processing, since the TPA is performing a task
traditionally handled by the company providing the insurance or the company itself. Often, in the
case of insurance claims, a TPA handles the claims processing for an employer that self-insures
its employees. Thus, the employer is acting as an insurance company and underwrites the risk.
The risk of loss remains with the employer, and not with the TPA. The employer may also
contract with a reinsurer to pay amounts in excess of a certain threshold, in order to share the risk
for potential catastrophic claims. An insurance company may also use a TPA to manage its
claims processing, provider networks, utilization review, or membership functions. While some
third-party administrators may operate as units of insurance companies, they are often
independent.
Third party administrators also handle many aspects of other employee benefit plans such as the
processing of retirement plans and flexible spending accounts. Many employee benefit plans
have highly technical aspects and difficult administration that can make using a specialized
entity such as a TPA more cost effective than doing the same processing in house.

Health care
Third party administrators are prominent players in the managed care industry and have the
expertise and capability to administer all or a portion of the claims process. They are normally
contracted by a health insurer or self-insuring companies to administer services, including claims
administration, premium collection, enrollment and other administrative activities. A hospital or
provider organization desiring to set up its own health plan will often outsource certain
responsibilities to a TPA.
For example, an employer may choose to help finance the health care costs of its employees by
contracting with a TPA to administer many aspects of a self-funded health care plan.

Commercial general liability

This term is also now commonly used in commercial general liability (CGL) policies or so called
"casualty" business. In these instances the liability policies are written with a large (in excess of
$50,000) self insured retention (SIR) that operates somewhat like a deductible, but rather than
being paid at the end of a claim (when a loss payment is made to a claimant) the money is paid
up front by the insured for costs, expenses, attorney fees etc. as the claim moves forward. If there
is a settlement or verdict within the SIR then that is also paid by the insured up to the limit of the
SIR, before the insurer steps in and pays its portion. The TPA acts like a claims adjuster for the
insurance company and sometimes works in conjunction with the inside insurance company
claims adjuster or an outside claims investigator as well as the defense counsel. The defense
counsel in some situations is selected by the TPA. The point is that the larger the SIR the more
responsibility the TPA has over the control of the way the claim is handled and ultimately
resolved. Some self insured retentions are in the millions of dollars and the TPAs are large
multinational non-insurance entities that handle all the claims. In some cases the insured sets up
an entire department within their company (and staffs it with claim savvy people) to act as the
TPA as opposed to hiring a commercial

Retirement plans
Retirement plans such as a 401(k) are often partly managed by an investment company. Instead
of handling all the plan contributions by employees, distributions to employees, and other
aspects of plan processing, the investment company may contract with a third party administrator
to handle much of the administrative work and only handle the remaining investment work.
3. CAT bonds
http://en.wikipedia.org/wiki/Cat_bonds
http://www.investopedia.com/terms/c/catastrophebond.asp

What Does Catastrophe Bond - CAT Mean?

A high-yield debt instrument that is usually insurance linked and meant to raise money in case of
a catastrophe such as a hurricane or earthquake. It has a special condition that states that if the
issuer (insurance or reinsurance company) suffers a loss from a particular pre-defined
catastrophe, then the issuer's obligation to pay interest and/or repay the principal is either
deferred or completely forgiven.

Investopedia explains Catastrophe Bond – CAT

Advantages of CAT bonds are that they are not closely linked with the stock market or economic
conditions and offer significant attractions to investors. For example, for the same level of risk,
investors can usually obtain a higher yield with CAT bonds relative to alternative investments.
Another benefit is that the insurance risk securitization of CATs shows no correlation with
equities or corporate bonds, meaning they'd provide a good diversification of risks.

Catastrophe bonds (also known as cat bonds) are risk-linked securities that transfer a specified
set of risks from a sponsor to investors. They were created and first used in the mid-1990s in the
aftermath of Hurricane Andrew and the Northridge earthquake.
Catastrophe bonds emerged from a need by insurance companies to alleviate some of the risk
they would face if a major catastrophe occurred, which would incur damages that they could not
cover by the premiums, and returns from investments using the premiums, that they
received[citation needed]. An insurance company issues bonds through an investment bank, which are
then sold to investors. These bonds are inherently risky, generally BB[citation needed], and are
multiyear deals. If no catastrophe occurred, the insurance company would pay a coupon to the
investors, who made a healthy return. On the contrary, if a catastrophe did occur, then the
principal would be forgiven and the insurance company would use this money to pay their
claimholders. Investors include hedge funds, catastrophe-oriented funds, and asset managers.
They are often structured as floating rate bonds whose principal is lost if specified trigger
conditions are met. If triggered the principal is paid to the sponsor. The triggers are linked to
major natural catastrophes. Catastrophe Bonds are typically used by insurers as an alternative to
traditional catastrophe reinsurance.
For example, if an insurer has built up a portfolio of risks by insuring properties in Florida, then
it might wish to pass some of this risk on so that it can remain solvent after a large hurricane. It
could simply purchase traditional catastrophe reinsurance, which would pass the risk on to
reinsurers. Or it could sponsor a cat bond, which would pass the risk on to investors. In
consultation with an investment bank, it would create a special purpose entity that would issue
the cat bond. Investors would buy the bond, which might pay them a coupon of LIBOR plus a
spread, generally (but not always) between 3 and 20%. If no hurricane hit Florida, then the
investors would make a healthy return on their investment. But if a hurricane were to hit Florida
and trigger the cat bond, then the principal initially paid by the investors would be forgiven, and
instead used by the sponsor to pay its claims to policyholders.[1]
Michael Moriarty, Deputy Superintendent of the New York State Insurance Department, has
been at the forefront of state regulatory efforts to have U.S. regulators encourage the
development of insurance securitizations through cat bonds in the United States instead of off-
shore, through encouraging two different methods—protected cells and special purpose
reinsurance vehicles.[2] In August 2007 Michael Lewis, the author of Liar's Poker and
Moneyball, wrote an article about catastrophe bonds that appeared in The New York Times
Magazine, entitled "In Nature's Casino."[3]

Catastrophe bonds (also known as cat bonds) are risk-linked securities that transfer a specified
set of risks from a sponsor to investors. They were created and first used in the mid-1990s in the
aftermath of Hurricane Andrew and the Northridge earthquake.
Catastrophe bonds emerged from a need by insurance companies to alleviate some of the risk
they would face if a major catastrophe occurred, which would incur damages that they could not
cover by the premiums, and returns from investments using the premiums, that they
received[citation needed]. An insurance company issues bonds through an investment bank, which are
then sold to investors. These bonds are inherently risky, generally BB[citation needed], and are
multiyear deals. If no catastrophe occurred, the insurance company would pay a coupon to the
investors, who made a healthy return. On the contrary, if a catastrophe did occur, then the
principal would be forgiven and the insurance company would use this money to pay their
claimholders. Investors include hedge funds, catastrophe-oriented funds, and asset managers.
They are often structured as floating rate bonds whose principal is lost if specified trigger
conditions are met. If triggered the principal is paid to the sponsor. The triggers are linked to
major natural catastrophes. Catastrophe Bonds are typically used by insurers as an alternative to
traditional catastrophe reinsurance.
For example, if an insurer has built up a portfolio of risks by insuring properties in Florida, then
it might wish to pass some of this risk on so that it can remain solvent after a large hurricane. It
could simply purchase traditional catastrophe reinsurance, which would pass the risk on to
reinsurers. Or it could sponsor a cat bond, which would pass the risk on to investors. In
consultation with an investment bank, it would create a special purpose entity that would issue
the cat bond. Investors would buy the bond, which might pay them a coupon of LIBOR plus a
spread, generally (but not always) between 3 and 20%. If no hurricane hit Florida, then the
investors would make a healthy return on their investment. But if a hurricane were to hit Florida
and trigger the cat bond, then the principal initially paid by the investors would be forgiven, and
instead used by the sponsor to pay its claims to policyholders.[1]
Michael Moriarty, Deputy Superintendent of the New York State Insurance Department, has
been at the forefront of state regulatory efforts to have U.S. regulators encourage the
development of insurance securitizations through cat bonds in the United States instead of off-
shore, through encouraging two different methods—protected cells and special purpose
reinsurance vehicles.[2] In August 2007 Michael Lewis, the author of Liar's Poker and
Moneyball, wrote an article about catastrophe bonds that appeared in The New York Times
Magazine, entitled "In Nature's Casino."[3]
 4. Mathematical reserves
http://www.frc.org.uk/documents/pagemanager/bas/GN44%20Mathematical%20Reserve
s%20and%20Resilience%20Capital%20Requirement%20V2.0%20(BAS%20Amendmen
t%201).pdf

Classification
Practice Standard
Purpose The FSA Prudential Sourcebooks (INSPRU and GENPRU) require insurance
companies and Directive friendly societies with long-term insurance liabilities to establish
mathematical reserves and, where applicable, a resilience capital requirement in respect of these
liabilities. They also set out detailed rules and guidance to follow in calculating these items,
including in particular a requirement to use methods and assumptions which are in accordance
with generally accepted actuarial practice, and more generally to establish adequate technical
provisions with due regard to generally accepted actuarial practice. The FSA Handbook states
that guidance notes such as this are important sources of evidence as to generally accepted
actuarial practice. This note therefore provides additional guidance to insurers and Directive
friendly societies on how to meet these requirements. Guidance for non-Directive friendly
societies is contained in GN8.
Definitions Terms defined by the FSA Handbook appear in italics when used in this document
and have the same meaning.
Legislation or Authority
The Financial Services and Markets Act 2000 The FSA Handbook of Rules and Guidance:
Application
The establishment of technical provisions in accordance with the rules and guidance relating to
mathematical reserves, and the calculation of the resilience capital requirement if required.
 5. Law of large numbers
http://www.hmrc.gov.uk/manuals/gimanual/gim1130.htm

The majority of insurers, however, will be unwilling or unable to go back to their policyholders
for additional payment if losses turn out to be greater than expected. They must rely on a cushion
of working capital (provided by the shareholders in anticipation of an investment return in a
proprietary company) to meet such losses. One of the main aims of insurance regulators is to
ensure that companies always have a sufficient margin of assets over estimated liabilities
appropriate to the business that they conduct.
The sharing and pooling of risk is still, however, vitally important. In the real world the pattern
of losses (cars stolen or houses burning down) is unstable. Suppose that, on average, one car in
ten is stolen each year. If the thefts are independent of one another an insurer who had only
insured ten cars would find that there was a one in four chance that two or more would be stolen,
which would double the expected outlay on claims. It would not be possible to do business on
that basis.
But if 100,000 cars are insured, the probability that more than 10,200 (or less than 9,800) will be
stolen is only about 1%. This is an example of the operation of the ‘law of large numbers’, which
may be expressed as follows:
"The observed frequency of an event more nearly approaches the underlying probability of the
population as the number of trials approaches infinity."
In other words, the more cars insured, the more accurately can be predicted the percentage of
cars likely to be stolen. It is this aspect of probability theory that enables the insurer to cope with
variations in the pattern of actual losses. Underwriters and actuaries may also consider various
measures of dispersion, that is the difference between the actual losses and average losses, when
setting premiums or assessing liabilities.
 6. Incurred But Not Reported claims
http://en.wikipedia.org/wiki/Incurred_but_not_reported

Incurred but not reported (IBNR) is a term in common use in insurance.

When a policy of insurance is written it will typically cover a defined (often 12 month) period
from inception of the policy. When the policy is sold, a premium is paid by the insured party to
the insurer. The number and cost of claims that will arise from the policy are unknown and
unknowable amounts at inception. Indeed, at expiry of the policy there can be a high degree of
uncertainty as to what the cost of claims will ultimately be. There might be some information
available on incurred claims amounts but this can often be zero.
The insurer will conduct a reserving exercise with a view to assessing what this ultimate cost will
be. This enables them to assess the profitability of the business that they have written and are
planning to write in the future.
Typical reserving methods used to assess ultimate claims and hence IBNR reserves include:
• Incurred Chain Ladder
• Paid Chain Ladder
• Incurred Bornhuetter-Ferguson
• Paid Bornhuetter-Ferguson
• Exposure-based methods
Other methods such as the Average Cost Per Claim and Separation are sometimes used.
Under Solvency II it has become fashionable to consider reserving on a stochastic claims
reserving methods, see Outstanding claims reserves.
There is an exceptionally low degree of agreement within general insurance as to what much of
the terminology actually means. IBNR is a widely accepted term with a fairly standard meaning.
This balancing item between the incurred claims and the ultimate claims is commonly referred to
as the IBNR or the IBNR reserve. In pure terms, it only allows for those claims that have
occurred before the valuation date but have not yet been reported to the insurer either directly or
through the broker, hence the name. This pure usage is not used in practice. The more common
usage includes reserves for items such as reopened claims, future claims on exposures to be
written within the projection period, salvage and subrogation.
The calculation of the IBNR reserve is a process that requires judgement and the results of which
will remain uncertain for several years. The reserving process is typically done at an aggregate
level. For example, at a class of business, underwriting year and currency level. It is important to
try to achieve a homogeneous data grouping and to treat any special claims separately. For
example, US Banks business written in 2001 needs to have any claims relating to the collapse of
the Enron Corporation treated separately. Similarly, US Property Excess of Loss business written
in 2004 and 2005 needs to have any claims relating to Hurricanes treated separately.
Such reserving calculations should be performed at a gross of reinsurance level and also for
outwards proportional reinsurance and outwards excess of loss reinsurance separately.
Reserving is increasingly undertaken by actuaries who are professionally qualified people. There
are still a large number of statisticians with years of experience but no formal qualifications
undertaking such work.
The above description is appropriate for most of the world and reflects the practices in the
London Market, although practices can differ.
 7. Social and rural sector obligations of insurance
http://www.irdaindia.org/Finance_And_Analysis/Obligations%20to%20Rural%20or%20
Social%20Sector-IRDA-FA-CIR-012-05-06-Dt.08-06-05.pdf
http://www.irdaindia.org/regulations/gaz-
Final%20Regulation%20Rural%20Sector%20Obligations.rtf

A. Obligation of insurers to rural or social sectors

Obligations in the sixth year of operations:

In exercise of the powers conferred by Section 32C read with Section 32B of the Insurance Act.
1938 the Authority had notified the IRDA (Obligation of insurers to rural or social sectors)
Regulations, 2000. The said Regulations were further substituted by IRDA (Obligation of
insurers to rural or social sectors) Regulations, 2002.
The Regulations provide for the obligations towards rural and social sectors for both life and
non-life insurers during the first five financial years. The Regulations further provide that the
Authority shall review such quantum of insurance business periodically and give directions to
the insurers for achieving the specified targets.
Since some of the insurers are in the sixth year of their operations during the financial year 2005-
06, the following directions are issued for compliance of rural and social sector obligations in the
said year:
1) In respect of life insurers, eighteen per cent of the total policies written direct shall be in the
rural sector. 2) In respect of the non-life insurers, five per cent of the total gross premium income
written direct shall be in the rural sector and
3) In respect of all insurers, twenty five thousand new lives shall be covered in the social sector
and the policies should be in force on 31st March of the year.
1For the present, the obligations for the insurers existing as on the date of commencement of the
IRDA Act shall continue to be the same as provided in the Regulations earlier notified.
B) Consistency in compliance with the obligation:
On the basis of the monthly premium statistics furnished with the Authority, it has been observed
that insurers do not spread out their obligations towards the rural and social sectors during the
course of the year. Rather, the compliance is achieved during the last two months of a given
financial year.
All insurers are advised to take steps to ensure that compliance with the rural and social
obligations is uniformly spread over a given financial year. The Authority would be reviewing
the performance of the insurers towards rural and social sector obligations on a quarterly basis.
All insurers are required to strictly adhere to the directive.
All insurers are required to take note for compliance.
 B. INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
(OBLIGATIONS OF INSURERS TO RURAL SOCIAL SECTORS)
REGULATIONS, 2002

In exercise of the powers conferred by section 32C read with section 32B of the
Insurance Act, 1938, (4 of 1938), the Authority, in consultation with the Insurance
Advisory Committee, hereby makes the following regulations to substitute the Insurance
Regulatory and Development Authority (Obligations of Insurers to Rural Social Sectors)
Regulations, 2000, namely: -

1. 1. Short title and commencement. ---- (1) These regulations may be called the
Insurance Regulatory and Development Authority (Obligations of Insurers to Rural or
Social Sectors) Regulations, 2002.

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

2. Definitions. — In these regulations, unless the context otherwise requires -

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

a. “Authority” means the Insurance Regulatory and Development Authority established

under the provisions of section 3 of the Insurance Regulatory and Development Authority
Act, 1999 (41 of 1999);

a. “Rural sector” shall mean any place as per the latest census which meets the
following criteria--
i. a population of less than five thousand;
ii. a density of population of less than four hundred per square kilometer; and
iii. more than twenty five per cent of the male working population is engaged in agricultural
pursuits.

Explanation :-

The categories of workers falling under agricultural pursuits are as under:

(i) Cultivators;
(ii) Agricultural labourers
(iii) Workers in livestock, forestry, fishing, hunting and plantations, orchards and
allied activities.
 a. “Social sector” includes unorganised sector, informal sector, economically vulnerable or
backward classes and other categories of persons, both in rural and urban areas;

a. “Unorganised sector” includes self-employed workers such as agricultural labourers, bidi

workers, brick kiln workers, carpenters, cobblers, construction workers, fishermen,
hamals, handicraft artisans, handloom and khadi workers, lady tailors, leather and tannery
workers, papad makers, powerloom workers, physically handicapped self-employed
persons, primary milk producers, rickshaw pullers, safai karmacharis, salt growers, seri
culture workers, sugarcane cutters, tendu leaf collectors, toddy tappers, vegetable
vendors, washerwomen, working women in hills, or such other categories of persons.,

a. “economically vulnerable or backward classes” means persons who live below the
poverty line;

a. “other categories of persons” includes persons with disability as defined in the Persons
with Disabilities (Equal Opportunities, Protection of Rights, and Full Participation) Act,
1995 and who may not be gainfully employed; and also includes guardians who need
insurance to protect spastic persons or persons with disability;

(h) “informal sector” includes small scale, self-employed workers typically at a low
level of organisation and technology, with the primary objective of generating
employment and income, with heterogeneous activities like retail trade, transport,
repair and maintenance, construction, personal and domestic services and
manufacturing, with the work mostly labour intensive, having often unwritten and
informal employer-employee relationship;

(i) 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. Obligations.--- Every insurer, who begins to carry on insurance business after the
commencement of the Insurance Regulatory and Development Authority Act, 1999 (41
of 1999), shall, for the purposes of sections 32B and 32C of the Act, ensure that he
undertakes the following obligations, during the first five financial years, pertaining to
the persons in---

(a) rural sector,

(i) in respect of a life insurer, --
(I) seven per cent in the first financial year;
 (II) nine per cent in the second financial year;
III. Twelve per cent in the third financial year;
IV. Fourteen per cent in the fourth financial year;
V. Sixteen per cent in the fifth year;

of total policies written direct in that year;

(ii) in respect of a general insurer,--

(I) two per cent in the first financial year;
(II) three per cent in the second financial year;
(III) five per cent there after,

of total gross premium income written direct in that year.

(b) social sector, in respect of all insurers, --

(I) five thousand lives in the first financial year;
(II) seven thousand five hundred lives in the second financial year;
III. ten thousand lives in the third financial year;
IV. fifteen thousand lives in the fourth financial year;
V. twenty thousand lives in the fifth year;

Provided that in the first financial year, where the period of operation is less than twelve
months, proportionate percentage or number of lives, as the case may be, shall be
undertaken.

Provided further that, in case of a general insurer, the obligations specified shall include
insurance for crops.

Provided further that the Authority may normally, once in every five years, prescribe or
revise the obligations as specified in this Regulation.

4. Obligations of existing insurers.--- (1) The obligations of existing insurers as

on the date of commencement of IRDA Act shall be decided by the Authority after
consultation with them and the quantum of insurance business to be done shall not be less
than what has been recorded by them for the accounting year ended 31st March, 2002.

(2) The Authority shall review such quantum of insurance business periodically and give
directions to the insurers for achieving the specified targets.
 8. Bancassurance
http://en.wikipedia.org/wiki/Bancassurance

The Bank Insurance Model ('BIM'), also sometimes known as 'Bancassurance', is the term
used to describe the partnership or relationship between a bank and an insurance company
whereby the insurance company uses the bank sales channel in order to sell insurance products.
BIM allows the insurance company to maintain smaller direct sales teams as their products are
sold through the bank to bank customers by bank staff.
Bank staff and tellers, rather than an insurance salesperson, become the point of sale/point of
contact for the customer. Bank staff are advised and supported by the insurance company
through product information, marketing campaigns and sales training.
Both the bank and insurance company share the commission. Insurance policies are processed
and administered by the insurance company.
BIM differs from 'Classic' or Traditional Insurance Model (TIM) in that TIM insurance
companies tend to have larger insurance sales teams and generally work with brokers and third
party agents.
An additional approach, the Hybrid Insurance Model (HIM), is a mix between BIM and TIM.
HIM insurance companies may have a sales force, may use brokers and agents and may have a
partnership with a bank.
BIM is extremely popular in European countries such as Spain, France and Austria.
The usage of the term picked up as banks and insurance companies merged and banks sought to
provide insurance, especially in markets that have been liberalised recently. It is a controversial
idea, and many feel it gives banks too great a control over the financial industry or creates too
much competition with existing insurers.
In some countries, bank insurance is still largely prohibited, but it was recently legalized in
countries such as the United States, when the Glass–Steagall Act was repealed after the passage
of the Gramm-Leach-Bliley Act. But revenues have been modest and flat in recent years, and
most insurance sales in U.S. banks are for mortgage insurance, life insurance or property
insurance related to loans. But China recently allowed banks to buy insurers and vice versa,
stimulating the bancassurance product, and some major global insurers in China have seen the
bancassurance product greatly expand sales to individuals across several product lines.
Privatbancassurance is a wealth management process pioneered by Lombard International
Assurance and now used globally. The concept combines private banking and investment
management services with the sophisticated use of life assurance as a financial planning structure
to achieve fiscal advantages and security for wealthy investors and their families.
 9. Investment guidelines- Asset Liability
and Solvency margins of IRDA
http://www.irdaindia.org/1983-ALS.rtf

In exercise of the powers conferred by clauses (y), (z) and (za) of sub-section (2) of
section 114A of the Insurance Act, 1938, (4 of 1938), read with section 26 of the
Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), the Authority,
in consultation with the Insurance Advisory Committee, hereby makes the following
regulations, namely:-

2. 1. Short title and commencement.----(1) These regulations may be called the

Insurance Regulatory and Development Authority (Assets, Liabilities, and Solvency
Margin of Insurers) Regulations, 2000.

(2) 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 ----

b. “Act” means the Insurance Act, 1938 (4 of 1938);
c. “Authority” means the Insurance Regulatory and Development Authority established
under sub-section (1) of section 3 of the Insurance Regulatory and Development
Authority Act, 1999 (41 of 1999);

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

b. 3. Valuation of Assets.--Every insurer shall prepare a statement of the value of

assets in Form IRDA- Assets- AA in accordance with Schedule I.

4. Determination of Amount of Liabilities.--Every insurer shall prepare a statement of

the amount of liabilities in accordance with Schedule II-A, in respect of life insurance
business, and in Form HG in accordance with Schedule II-B, in respect of general
insurance business, as the case may be.

b. 5. Determination of Solvency Margin.--Every insurer shall prepare a statement of

solvency margin in accordance with Schedule III-A, in respect of life insurance business,
 and in Form KG in accordance with Schedule III-B, in respect of general insurance
business, as the case may be.

iv. 6. Health Insurance Business. -- Where the insurer transacts health insurance
business, providing health covers, the amount of liabilities shall be determined in
accordance with the principles specified under these Regulations.

b. 7. Business outside India.-- Where the insurer transacts insurance business in a

country outside India, and submits statements or returns or any such particulars to a
public authority of that country, he shall enclose the same along with the Forms specified
in accordance with these Regulations and the Insurance Regulatory and Development
Authority (Actuarial Report and Abstract) Regulations, 2000.

Provided that if the appointed actuary is of the opinion that it is necessary to set
additional reserves over and above the reserves shown in the statements or returns or any
such particulars submitted to the public authority of a country outside India, he may set
such additional reserves.

b. 8. Furnishing of Forms.--- The Forms, namely, Form IRDA- Assets- AA , Form

HG, and Form KG, shall be furnished separately for Business within India and Total
Business transacted by the insurer.

9. Personal visit of appointed actuary to the Authority.-- The Authority may, if

considered necessary and expedient, ask the appointed actuary to make a personal visit to
the office of the Authority to elicit from him any further information.
 Schedule I

VALUATION OF ASSETS

(see Regulation 3)

1. Interpretation. In this Schedule, unless the context otherwise requires, ‘non-mandated

investments’ means those investments that are neither approved securities nor approved
investments.

b. Values of Assets.—(1) The following assets should be placed with value zero,--
b. Agent’s balances and outstanding premiums in India, to the extent they are not realised
within a period of thirty days;
c. Agents’ balances and outstanding premiums outside India, to the extent they are not
realisable ;
d. Sundry debts, to the extent they are not realisable;
e. Advances of an unrealisable character;
f. Furniture, fixtures, dead stock and stationery;
g. Deferred expenses;
h. Profit and loss appropriation account balance and any fictitious assets other than pre-paid
expenses;
i. Reinsurer’s balances outstanding for more than three months;
j. Preliminary expenses in the formation of the company;

VI. (2) The value of computer equipment including software shall be computed as
under:--
(i) seventy five per cent. of its cost in the year of purchase;
(ii) fifty per cent. of its cost in the second year;
(iii) twenty-five per cent. of its cost in the third year; and
(iv) zero per cent. thereafter.

VI. (3) All other assets of an insurer have to be valued in accordance with the Insurance
Regulatory and Development Authority (Preparation of Financial Statements and
Auditor’s Report of Insurance Companies) Regulations, 2000.

3. Statement of Assets.--Every insurer shall prepare a statement of assets in Form IRDA-

Assets- AA.
 Form IRDA- Assets- AA
(See Regulation 3)

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (ASSETS,

LIABILITIES, AND SOLVENCY MARGIN OF INSURERS) REGULATIONS, 2000.

Statement of Assets as at 31st March,20___.

Form Code: [ ][ ][ ][ ][ ][ ][ ][ ][ ]

Name of Insurer: Registration Number: Date of registration:

____________

Classification: Business Within India/ Total Business

Item No. Category of Asset Policyholders' Shareholders'

funds: funds: Amount ( in
(1) rupees lakhs) as
Amount ( in per (a) below
rupees lakhs) as
per (a) below (4)
(2)
(3)

01 Approved
Securities

02 Approved
Investments

03 Deposits

04 Non-Mandated
Investments

Other Assets,
specify
05

06 Total

07 Fair Value Change

 Account

08 Adjusted Value of
Assets:

(6) - (7)

I certify that the statement has been prepared in accordance with Schedule I.

Place Name and Signature of Appointed Actuary.

(in case of a life insurer)
Date
/ Name and Signature of Auditor
(in case of a general insurer)

Notes: The statement shall show the value of the above-mentioned categories of assets
in accordance with Regulation 2 in Schedule I.
 Schedule II-A

Valuation of Liabilities - Life Insurance

(See Regulation 4)

1. Interpretation.--In this Schedule, --

a. (a) “valuation date”, in relation to an actuarial investigation, means the date to which
the investigation relates.

a. (b) “universal life contracts” means those contracts that are presented in an
unbundled form. The contracts where policyholders have an option to invest in units of
insurer’s segregated fund(s) shall be treated as “linked business”; and others shall be
treated as “non-linked business”.

a. (c) “segregated funds” means funds earmarked in respect of linked business.

2. 2. Method of Determination of Mathematical Reserves.—(1) Mathematical

Reserves shall be determined separately for each contract by a prospective method of
valuation in accordance with sub-paras (2) to (4)..

The valuation method shall take into account all prospective contingencies under which any
premiums (by the policyholder) or benefits (to the policyholder/beneficiary) may be payable
under the policy, as determined by the policy conditions. The level of benefits shall take into
account the reasonable expectations of policyholders (with regard to bonuses, including terminal
bonuses, if any) and any established practices of an insurer for payment of benefits.

The valuation method shall take into account the cost of any options that may be available to the
policyholder under the terms of the contract.

The determination of the amount of liability under each policy shall be based on prudent
assumptions of all relevant parameters. The value of each such parameter shall be based on the
insurer’s expected experience and shall include an appropriate margin for adverse deviations
(hereinafter referred to as MAD) that may result in an increase in the amount of mathematical
reserves.
(i) The amount of mathematical reserve in respect of a policy, determined in accordance with
sub-para (4), may be negative (called “negative reserves”) or less than the guaranteed surrender
value available (called “guaranteed surrender value deficiency reserves”) at the valuation date.

i. (ii) The appointed actuary shall, for the purpose of section 35 of the Act, use the
amount of such mathematical reserves without any modification;

i. (iii) The appointed actuary shall, for the purpose of sections 13, 49, 64V and 64VA of
the Act, set the amount of such mathematical reserve to zero, in case of such negative
reserve, or to the guaranteed surrender value, in case of such guaranteed surrender value
deficiency reserves, as the case may be.

The valuation method shall be called “Gross Premium Method’.

If in the opinion of the appointed actuary, a method of valuation other than the Gross Premium
Method of valuation is to be adopted, then, other approximations (e.g. retrospective method) may
be used.

Provided that the amount of calculated reserve is expected to be atleast equal to the amount that
shall be produced by the application of Gross Premium Method.

The method of calculation of the amount of liabilities and the assumptions for the valuation
parameters shall not be subject to arbitrary discontinuities from one year to the next.

The determination of the amount of mathematical reserves shall take into account the nature and
term of the assets representing those liabilities and the value placed upon them and shall include
prudent provision against the effects of possible future changes in the value of assets on the
ability of the insurer to meet its obligations arising under policies as they arise.

3. Policy Cash Flows.--- The gross premium method of valuation shall discount the
following future policy cash flows at an appropriate rate of interest,---

a. (a) premiums payable, if any, benefits payable, if any, on death; benefits

payable, if any, on survival; benefits payable, if any, on voluntary termination of
contract, and the following, if any, :-
i. (i) basic benefits,
ii. (ii) rider benefits,
iii. (iii) bonuses that have already been vested as at the valuation date,
 iv. (iv) bonuses as a result of the valuation at the valuation
date, and
v. (v) future bonuses (one year after valuation date)
including terminal bonuses (consistent with the valuation
rate of interest);

a. (b) commission and remuneration payable, if any, in respect of a policy (This

shall be based on the current practice of the insurer). No allowance shall be
made for non-payment of commissions in respect of the orphaned policies;
b. (c) policy maintenance expenses, if any, in respect of a policy, as provided
under sub-para (4) of para 5;

a. (d) allocation of profit to shareholders, if any, where there is a specified

relationship between profits attributable to shareholders and the bonus rates
declared for policyholders.

Provided that allowance must be made for tax, if any.

a. 4. Policy Options. –Where a policy provides built-in options, that may be exercised
by the policyholder, such as conversion or addition of coverage at future date(s)
without any evidence of good health, annuity rate guarantees at maturity of contract,
etc., the costs of such options shall be estimated and treated as special cash flows in
calculating the mathematical reserves.

a. 5. Valuation Parameters.—(1) The valuation parameters shall constitute the bases

on which the future policy cash flows shall be computed and discounted. Each
parameter shall have to be appropriate to the block of business to be valued. An
appointed actuary shall take into consideration the following,--

(a) The value(s) of the parameter shall be based on the insurer’s experience study, where
available. If reliable experience study is not available, the value(s) can be based on the industry
study, if available and appropriate. If neither is available, the values may be based on the bases
used for pricing the product. In establishing the expected level of any parameter, any likely
deterioration in the experience shall be taken into account;

(b) The expected level, as determined in clause (a) of this sub-para, shall be adjusted by an
appropriate Margin for Adverse Deviations (MAD), the level of MAD being dependent on the
degree of confidence in the expected level, and such MAD in each parameter shall be based on
the Guidance Notes issued by the Actuarial Society of India, with the concurrence of the
Authority
(c) The values used for the various valuation parameters should be consistent among themselves.

(2) Mortality rates to be used shall be by reference to a published table, unless the insurer has
constructed a separate table based on his own experience:

Provided that such published table shall be made available to the insurance industry by the
Actuarial Society of India, with the concurrence of the Authority.

Provided further that such rates determined by reference to a published table shall not be less
than hundred per cent. of that published table.

Provided further that such rates determined by reference to a published table may be less than
hundred per cent. of that published table if the appointed actuary can justify a lower per cent.

(3) Morbidity rates to be used shall be by reference to a published table, unless the insurer has
constructed a separate table based on his own experience:

Provided that such published table shall be made available to the insurance industry by the
Actuarial Society of India, with the concurrence of the Authority:

Provided further that such rates determined by reference to a published table shall not be less
than hundred per cent. of that published table.

Provided further that such rates determined by reference to a published table may be less than
hundred per cent. of that published table if the appointed actuary can justify a lower per cent.

(4) Policy maintenance expenses shall depend on the manner, in which they are analysed by
the insurer, viz., fixed expenses and variable expenses. The variable expenses shall be related to
sum assured or premiums or benefits. The fixed expenses may be related to sum assured or
premiums or benefits or per policy expenses. All expenses shall be increased in future years for
inflation, the rate of inflation assumed should be consistent with the valuation rate of interest.

(5) Valuation rates of interest, to be used by appointed actuary -

a. (a) shall be not higher than the rates of interest, for the calculation of the
present value of policy cash flows referred to in para 4, determined from prudent
assessment of the yields from existing assets attributable to blocks of life insurance
business, and the yields which the insurer is expected to obtain from the sums
invested in the future, and such assessment shall take into account ---
 i. (i) the composition of assets supporting the liabilities, expected cash flows
from the investments on hand, the cash flows from the block of policies to be
valued, the likely future investment conditions and the reinvestment and
disinvestment strategy to be employed in dealing with the future net cash flows;

i. (ii) the risks associated with investment in regard to receipt of income on such
investment or repayment of principal;

i. (iii) the expenses associated with the investment functions of the insurer;

a. (b) shall not be higher than, for the calculation of present value of policy cash
flows in respect of a particular category of contracts, the yields on assets
maintained for the purpose of such category of contacts;

a. (c) in respect of non-participating business, shall recognise the risk of decline

in the future interest rates;

a. (d) in respect of participating business , shall be based on the assumption

(with regard to future investment conditions), that the scale of future bonuses used
in the valuation is consistent with the valuation rate of interest, and

a. (e) in respect of single premium business, shall take into account the effect of
changes in the risk-free interest rates.

(6) Other parameters, may be taken into account, depending on the type of policy. In
establishing the values of such parameters, the considerations set out in this Schedule shall be
taken into account.

6. Applicability to Reinsurance.—(1) This Schedule shall also apply to the valuation of

business in the books of reinsurers.

As regards the business ceded by insurers, this Schedule shall be applicable to the net sums at
risk retained by the insurer.

(3) Reinsurance arrangement with an element of borrowing in the form of deposit or credit of
any kind from insurer’s reinsurers without the prior approval of the Authority shall not be treated
as credit for reinsurance for the purpose of determination of required solvency margin.
7. Additional Requirements for Linked Business.—(1) Reserves in respect of linked
business shall consist of two components, namely, unit reserves and general fund reserves.

(2) Unit reserves shall be calculated in respect of the units allocated to the policies in force at the
valuation date using unit values at the valuation date.

(3) General fund reserves (non-unit reserves) shall be determined using a prospective valuation
method set out in this Schedule, which shall take into account of the following, namely:-

a. (a) premiums, if any, payable in future;

b. (b) death benefits, if any, provided by the general fund (over and above the
value of units);
c. (c) management charges paid to the general fund;
d. (d) guarantees, if any, relating to surrender values or minimum death and
maturity benefits;
e. (e) fund growth rates and management charges. (The values of these
parameters, along with others, shall be determined in accordance with para 5);
f. (f) negative reserves, if any, shall be dealt with in accordance with sub-para
(5) of para 2

i. 8. Additional Requirements for Provisions.--- The appointed actuary shall

make aggregate provisions in respect of the following, where it is not possible to
calculate mathematical reserves for each policy, in the determination of
mathematical reserves:-

(a) Policies in respect of which extra premiums have been charged on account of underwriting of
under-average lives that are subject to extra risks such as occupation hazard, over-weight, under-
weight, smoking history, health, climatic or geographical conditions;
a. (b) Lapses policies not included in the valuation but under which a liability
exists or may arise;
b. (c) Options available under individual and group insurance policies;
c. (d) Guarantees available to individual and group insurance policies;
d. (e) The rates of exchange at which benefits in respect of policies issued in
foreign currencies have been converted into Indian Rupees and what provision has
been made for possible increase of mathematical reserves arising from future
variations in rates of exchange;
e. (f) Other, if any.
i. 9. Statement of Liabilities-- An insurer shall furnish a statement of liabilities in
accordance with the Insurance Regulatory and Development Authority (Actuarial
Report and Abstract) Regulations, 2000.
 Schedule II-B
(See Regulation 4)

Valuation of Liabilities (General Insurance)

Interpretation.--In this schedule,----
a. (a) "Reserve for claims incurred but not reported
(IBNR") means the reserve for claims incurred but not
reported on the balance sheet date, and includes reserve for
claims which may be inadequately reserved;
b. (b) "Reserve for outstanding claims" means the reserve
for outstanding claims as mentioned in para 2(1)(b)(iii) of
this Schedule;

Determination of Liabilities.— An insurer shall ---

(i) place a proper value in respect of the following items, namely:-

provision for bad and doubtful debts,

reserve for dividends declared or recommended, and outstanding dividends in full,
amount due to insurance companies carrying on insurance business, in full,
amount due to sundry creditors, in full,
provision for taxation, in full, and
foreign exchange reserve.

a. (ii) determine the amount of following reserves, in the

manner specified herein below for each reserve:-

(a) reserve for unexpired risks, shall be, in respect of,---

Fire business, 50 per cent,

Miscellaneous business, 50 per cent,
Marine business other than marine hull business, 50 per cent; and
Marine hull business, 100 per cent,
of the premium, net of re-insurances, received or receivable during the preceding twelve
months;

(b) reserve for outstanding claims shall be determined in the following manner:-

where the amounts of outstanding claims of the insurers are known, the amount is to be provided
in full;
where the amounts of outstanding claims can be reasonably estimated according to the insurer,
he may follow the 'case by case method' after taking into account the explicit allowance for
changes in the settlement pattern or average claim amounts, expenses and inflation;

(c) reserve for claims incurred but not reported (IBNR) shall be determined using
actuarial principles. In such determination, the appointed actuary shall follow the
Guidance Notes issued by the Actuarial Society of India, with the concurrence of the
Authority, and any directions issued by the Authority, in this behalf.

Statement of Liability.--Every general insurer shall prepare a statement of liabilities in Form

HG, certified by an auditor approved by the Authority in accordance with Section 64V of the
Act, and also certified by its appointed actuary in respect of IBNR reserves. The statement shall
be furnished to the Authority along with the returns mentioned in section 15 of the Act.
 10. Investment norms
http://www.moneycontrol.com/news/business/irda-issues-new-investment-guidelines-for-
insurance-cos_353156.html
http://www.financialexpress.com/news/irda-liberalises-equity-investment-norms-by-
insurers/34666/0

Insurance Regulatory and Development Authority (IRDA) has announced fresh investment
guidelines that seek to create a level playing field between private players and LIC (Life
Insurance Corporation). The biggest impact of these guidelines will be on LIC. Earlier LIC was
allowed to hold up to 30% of stake in any company but now it may be able hold only up to 10%.
It may have to dilute stake in companies where holding is more than 10%. LIC currently holds
more than 10% in companies such as Ranbaxy,Mahindra, L&T.
Insurance companies can now invest upto 5% in liquid funds. According to the new insurance
rules, companies can now invest in mortgage-backed securities, bonds floated by SEZs and
liquid funds. Mutual Fund companies may see upto Rs 52,000 crore coming in from insurance
companies for liquid funds.

The Insurance Regulatory and Development Authority (Irda) has liberalised norms for equity
investment by insurers. The scope of investment has thus, been expanded to “equity shares other
than those classified as thinly traded” as per the mutual fund guidelines of the Securities and
Exchange Board of India (Sebi), informed sources said.
The authority had earlier amended the original regulations to elaborate on the type of equity
investments allowed. The permissible “actively traded and liquid instruments” had been defined
as those whose “trading volume does not fall below 10,000 units in any trading session during
the last 12 months or trading value of which exceeds Rs 10 lacs in any trading session during last
12 months”.
The move came recently in the wake of requests from insurance companies that the investment
regulations were too restrictive in view of the paucity of sufficient avenues on the lines of those
stipulated.
While a number of new companies, like Max New York Life and ING Vysya Life have taken a
policy decision to steer clear of equity investments as of now, others are quite bullish despite the
10 per cent cap on their investment in any one company, group or sector. The public sector
insurers too have been investing in equity within the specified norms.
According to the first Irda annual report, the Life Insurance Corporation had in 2000-01 invested
a total of Rs 193,283 crore, of which nearly 10 per cent or Rs 1,8577 crore was in “other than
approved investments”. In the same year, six new life insurance players launched operations
from December onwards. In the limited remaining period of that fiscal, only two of them
invested in such instruments — Birla SunLife Rs 4.55 crore out of a total of Rs 104.34 crore and
O M Kotak Life Rs 2.33 crore out of an aggregate Rs 152.25 crore.
The others put their investible funds into government and other approved securities,
infrastructure and “approved investments”. HDFC Standard Life had a total investment of Rs
156.32 crore, Max New York Life Rs 72.27 crore, ICICI Prudential Rs 124.67 crore and Tata
AIG Life Rs 116.76 crore. Among general insurers, the five public sector companies together
invested Rs 3,737.24 crore in “other than approved” instruments. Of the four newly licensed
play’s, only one — Reliance General — invested Rs 24 crore in the equity segment out of a total
Rs 97.5 crore. The total investment by Royal Sundaram in the period was Rs 81.98 crore, Iffco-
Tokio Rs 105.11 crore and Tata AIG General Rs 108.7 crore.
 11. Names of all life and non-life insurance companies
registered in India, their punch lines and websites
http://www.iloveindia.com/finance/insurance/companies/index.html

In India, Insurance is a national matter, in which life and general insurance is yet a
booming sector with huge possibilities for different global companies, as life insurance
premiums account to 2.5% and general insurance premiums account to 0.65% of India's
GDP. The Indian Insurance sector has gone through several phases and changes,
especially after 1999, when the Govt. of India opened up the insurance sector for private
companies to solicit insurance, allowing FDI up to 26%. Since then, the Insurance sector
in India is considered as a flourishing market amongst global insurance companies.
However, the largest life insurance company in India is still owned by the government.

The history of Insurance in India dates back to 1818, when Oriental Life Insurance
Company was established by Europeans in Kolkata to cater to their requirements.
Nevertheless, there was discrimination among the life of foreigners and Indians, as higher
premiums were charged from the latter. In 1870, Indians took a sigh of relief when
Bombay Mutual Life Assurance Society, the first Indian insurance company covered
Indian lives at normal rates. Onset of the 20th century brought a drastic change in the
Insurance sector.

In 1912, the Govt. of India passed two acts - the Life Insurance Companies Act, and the
Provident Fund Act - to regulate the insurance business. National Insurance Company
Ltd, founded in 1906, is the oldest existing insurance company in India. Earlier, the
Insurance sector had only two state insurers - Life Insurers i.e. Life Insurance
Corporation of India (LIC), and General Insurers i.e. General Insurance Corporation of
India (GIC). In December 2000, these subsidiaries were de-linked from parent company
and were declared independent insurance companies: Oriental Insurance Company
Limited, New India Assurance Company Limited, National Insurance Company Limited
and United India Insurance Company Limited.

Insurance Companies In India

(Click on the Company name to get its website & Punch line details)

• Bajaj Allianz Life Insurance Company Limited

• Birla Sun Life Insurance Co. Ltd
• HDFC Standard life Insurance Co. Ltd
• ICICI Prudential Life Insurance Co. Ltd.
• ING Vysya Life Insurance Company Ltd.
• Life Insurance Corporation of India
• Max New York Life Insurance Co. Ltd
• Met Life India Insurance Company Ltd.
• Kotak Mahindra Old Mutual Life Insurance Limited
• SBI Life Insurance Co. Ltd
• Tata AIG Life Insurance Company Limited
• Reliance Life Insurance Company Limited.
• Aviva Life Insurance Co. India Pvt. Ltd.
• Shriram Life Insurance Co, Ltd.
• Sahara India Life Insurance
• Bharti AXA Life Insurance
• Future Generali Life Insurance
• IDBI Fortis Life Insurance
• Canara HSBC Oriental Bank of Commerce Life Insurance
• Religare Life Insurance
• DLF Pramerica Life Insurance
• Star Union Dai-ichi Life Insurance
• Agriculture Insurance Company of India
• Apollo DKV Insurance
• Cholamandalam MS General Insurance
• HDFC Ergo General Insurance Company
• ICICI Lombard General Insurance
• IFFCO Tokio General Insurance
• National Insurance Company Ltd
• New India Assurance
• Oriental Insurance Company
• Reliance General Insurance
• Royal Sundaram Alliance Insurance
• Shriram General Insurance Company Limited
• Tata AIG General Insurance
• United India Insurance
• Universal Sompo General Insurance Co. Ltd
12. Reinsurance

http://www.investopedia.com/terms/r/reinsurance.asp

What Does Reinsurance Mean?

The practice of insurers transferring portions of risk portfolios to other parties by some
form of agreement in order to reduce the likelihood of having to pay a large obligation
resulting from an insurance claim. The intent of reinsurance is for an insurance company
to reduce the risks associated with underwritten policies by spreading risks across
alternative institutions.

Also known as "insurance for insurers" or "stop-loss insurance".

Investopedia explains Reinsurance

Overall, the reinsurance company receives pieces of a larger potential obligation in
exchange for some of the money the original insurer received to accept the obligation.

The party that diversifies its insurance portfolio is known as the ceding party. The party
that accepts a portion of the potential obligation in exchange for a share of the insurance
premium is known as the reinsurer.