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Mark your dates 14th Global Conference of Actuaries, 19th 21st February, 2012 in Mumbai

The Actuary India June 2011

COnTEnTswww.actuariesindia.org

Chief Editor Taket, Nick Tel: +91/22/6740-3333 Email: nick.taket@idbifederal.com Editor Sharma, Sunil Email: sharma.sunil@iciciprulife.com Puzzle Editor Mainekar, Shilpa Email: shilpa_vm@hotmail.com Manager (Library and Publishing) Rautela, Binita Tel: +91 22 6784 3325 Email: library@actuariesindia.org COUNTRY REPORTERS Smith, John Laurence New Zealand Email: Johns@fidelitylife.co.nz

Kakar, Gautam European Union (EU) Email: kakar.gautam@gmail.com Chung, Phuong Ba Taiwan, Hong Kong & Japan Email: phuongchung1971@yahoo.com Sharma, Rajendra Prasad USA Email: rpsharma0617@yahoo.com Cheema, Nauman Pakistan Email: info@naumanassociates.com Leung , Andrew Thailand Email: andrew.leung@iprbthai.org Krishen, Sukdev South Africa Email: Krishen.Sukdev@absa.co.za

FROM THE CHIEF EDITOR 4 NICK TAKET bids farewell to Dr. Kannan and Mr. Subrahmanyam on their retirement from IRDA and also discusses about current challenges facing the Insurance Industry and the IRDA. REPORTAGE 1st Strategy Initiative Workshop

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by Binita Rautela1st Seminar On Capacity Building In Non-Life Industry-Actuarial And Analytics 6

by Prasun Sarkar FEATURES

IASB Insurance Contracts Exposure Draft: Summary and Key Observations

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by Mark Saunders and John NichollsPractical Considerations in Variable Annuity Pricing inspires change for Indian insurers 14

by Novian Junus & David Wang COUNTRY REPORT

USA -Guaranteed Uncertainty Socioeconomic Influences on Product Development and Distribution In the Life Insurance Industry by Rajendra P Sharma

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For circulation to members, connected individuals and organizations only. Disclaimer : Responsibility for authenticity of the contents or opinions expressed in any material published in this Magazine is solely of its author and the Institute of Actuaries of India, any of its editors, the staff working on it or "the Actuary India" is in no way holds responsibility there for. In respect of the advertisements, the advertisers are solely responsible for contents and legality of such advertisements and implications of the same. The tariff rates for advertisement in the Actuary India are as under: Back Page colour Rs. 35,000/Full Page b/w Rs. 20,000/Full page colour Rs. 30,000/Half Page b/w Rs. 15,000/Half Page colour Rs. 20,000/Your reply along with the details/art work of advertisement should be sent to library@actuariesindia.org ENQUIRIES ABOUT PUBLICATION OF ARTICLES OR NEWS Please address all your enquiries with regard to the magazine by e-mail at binita@actuariesindia.org. Kindly do not send it to editor or any other functionaries.

STUDENTS COLUMN

Impending convergence with IFRSs in India Benefits and Challenges by CA. Sarweshwar Biyani

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FROM THE DESK OF Chairperson Advisory Group on Communication (AGC) - Sunil Sharma 27

BOOK REVIEW A Problem-Solving Approach to Pension Funding and Valuation by William H Aitken Reviewed by Kulin Patel 28

CAREER OPPORTUNITY Apply for Whole-time Member (Actuary) in IRDA. Last date 30.6.2011 Apply for Senior and Junior Actuarial post at Nalin Kapadia Actuarial Consultancy Apply for various vacancies at Mercer 29 30 31

Printed and Published monthly by Gururaj Nayak, Administrative Officer, Institute of Actuaries of india at Alco Corporation, A-1 / 16, Ground Floor, Shah - Nahar Indust. Estate, Lower Parel (W) Mumbai - 400 013 for Institute of Actuaries of india : 302, Indian Globe Chambers, 142, Fort Street, Off D N Road, Near CST (VT) station, Mumbai 400 001. Tel +91 22 6784 3325 / 6784 3333 Fax +91 22 6784 3330 Email : library@actuariesindia.org Webside : www.actuariesindia.org

Indian Actuarial Profession Serving the Cause of Public Interest3

The Actuary India June 2011

Mark your dates 14th Global Conference of Actuaries, 19th 21st February, 2012 in Mumbai

FROM THE CHIEF EDITORThis month marks the retirement from the Insurance Regulatory and Development Authority of two highly respected members of our profession. Dr. Kannan and Mr. Subrahmanyam have both given many years of distinguished service to the insurance industry and to protecting the public interest through their roles at the IRDA. They have been centrally involved in the development and regulation of insurance, and have ensured that there has been a strong actuarial foundation to the work of the Authority. Our profession owes them a debt of gratitude for their efforts and we can feel proud of their achievements. At a personal level I have always enjoyed my interactions with them and am grateful for the guidance and support that they have freely offered over many years. They both leave behind a strong legacy, and whoever takes over their respective roles will find that they are stepping into very big shoes. I hope the IRDA has or will be able to find replacements of equal caliber so as to ensure the continuity of a strong actuarial presence within the Authority. Before joining the IRDA, Dr. Kannan and Mr. Subrahmanyam have both had long and distinguished careers, so I feel sure that their retirement from the Authority is only the closing of one chapter and the beginning of a new one. Whatever their future plans are, I am sure all members of the Institute will join me in wishing them every success for the future as well as health and happiness in all aspects of their lives. ---------The insurance industry was opened up to competition from the first private sector companies around 10 years ago. At that time the IRDA rightly identified products as a key regulatory priority, and consequently instituted the file and use process for new life insurance products. A lot has happened in the intervening years, the IRDA has put in place a comprehensive set of product circulars and guidelines that set out the boundaries within which life companies can develop new products; the industry and the companies have matured; the issues facing the insurance companies have moved away from products towards productivity, expenses and premium persistency; the Authority is now placing far greater emphasis on these new challenges. Given these developments it is natural to ask whether the time has arrived for the Authority to set aside the file and use process and allow companies to develop products within the framework of the existing comprehensive set of guidelines. Of course there would need to be safeguards, but perhaps these could be provided just by a straightforward certification from the Appointed Actuary. This could be based on the current certification at the end of the current file and use procedure to the effect that the product is actuarially sound and the terms and conditions are fair. In addition, the CEO and AA could certify that the product complies with the Insurance Act, the regulations, the product guidelines and circulars. This approach to products would place a greater level of responsibility on individual companies, but the nature of the regulations issued in recent years should make the companies aware of the likely consequences of a failure to live up to the responsibilities placed on them. Now that the IRDA has in place its integrated grievance monitoring system, the Authority should be able to quickly identify any issues thrown up by poor product design, and take immediate corrective action. Such an approach would relieve the Authority of the very significant burden of examining all the new products and product amendments of the growing number of insurance companies. This work load is only likely to grow in future as companies develop more products in search of greater productivity from their distribution channels. Freed from these onerous tasks the IRDA would be better placed to work with the industry in overcoming the current challenges it faces. Nick Taket

Indian Actuarial Profession Serving the Cause of Public Interest4

Mark your dates 14th Global Conference of Actuaries, 19th 21st February, 2012 in Mumbai

The Actuary India June 2011

REPORTAGE1sT sTRaTEgy InITIaTIvE WORksHOpOrganized by: the Strategy Initiative Task Force (SITF) Held at: Sea Princess Hotel, Juhu Beach, Mumbai Date: May, 14th 2011 The 1st Strategy Initiative Workshop aimed at Strategy Initiative Wider Group (SIWG) consisting of Council members, Chairs/Secretaries of the Advisory Groups, SITF members and some senior invited IAI members and senior staff of the Institute was first in a series of workshops that have been planned on the subject. By Binita Rautela binita@actuariesindia.orgl

Employers perception of the Actuarial functions The Group 3presentation by Nick Taket: Weak member engagement with the Institute

l Left to right Sunil Sharma, Nick Taket, Meenakshi Malhotra, T. Bhargava

Deliberations started on issues and challenges keeping in view the Vision, Mission & Values of the three advisory groups slated for the day: Education, Examinations and Life Insurance. Presentations made by each group centered around:The Group 1- presentation

Low service delivery of the Institute Secretariat

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Institutes reach-out to other jurisdictions for Education and Service Delivery

The Group 4- presentation by Tania Chakrabarti: Competitiveness with comparable professional routes of qualificationl l

Low Research and Development support to the members Stakeholder/Public perception of the Institute and its members

In conversation Mr. G. N Agarwal and Mr. A. D. Gupta

by Rajesh Dalmia:

The workshop started with address by Mr. Liyaquat Khan. He shared his idea of Vision, Mission & Values and the Strategies to be formulated to address the issues and challenges that the Institute/ Pro

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