IRDAI Proposes Major Actuarial Rule Changes to Align with Insurance Law Amendments

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The Insurance Regulatory and Development Authority of India (IRDAI) has issued the Exposure Draft of the IRDAI (Actuarial, Finance and Investment Functions of Insurers) (Second Amendment) Regulations, 2026, proposing extensive amendments to the 2024 Regulations to align them with the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025. The draft introduces new categories of actuaries, including Certifying Actuary for Foreign Reinsurer’s Branches (FRBs) and Actuary for Specific Purposes, while prescribing detailed eligibility criteria, powers, responsibilities, reporting obligations, and conflict-of-interest safeguards. It replaces the term “Actuarial Report and Abstract” with “Actuary Report” throughout the regulations and mandates standardized actuarial reporting, including Financial Condition Reports, solvency assessments, valuation surplus reporting, and certifications for insurers and reinsurers. The amendments also revise investment norms by permitting limited investments in infrastructure SPV debt, private limited companies, repo and reverse repo transactions, while updating exposure limits and promoter-group investment restrictions. Further, the draft introduces comprehensive reporting formats, governance requirements, and enhanced actuarial oversight for life, general, health, and reinsurance businesses. Overall, the proposed amendments seek to strengthen risk management, improve transparency, modernize actuarial governance, and align India’s insurance regulatory framework with the amended insurance laws while enhancing prudential supervision and financial resilience across the insurance sector.

Insurance Regulatory and Development Authority of India

Consultation paper on proposed amendments to IRDAI (Actuarial, Finance and Investment Functions of Insurer), Regulations, 2024

Date: 19^th June, 2026

1. Executive Summary

The insurance sector in India has undergone significant reforms pursuant to the enactment of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (“SBSR Act”). The Insurance Regulatory and Development Authority of India (IRDAI) proposes IRDAI (Actuarial, Finance and Investment Functions of Insurer), (Second Amendment) Regulations, 2026, in light of the changes introduced through the SBSR Act.

The amendments seek to deepen insurance penetration, improve ease of doing business, enhance availability of long-term capital, and strengthen the prudential regulatory framework for insurers. Major reforms under the SBSR Act relate to investments by insurance companies and extending actuarial investigation into financial condition to all the insurers.

The proposed changes relate to regulatory framework regarding appointment of actuaries, manner of preparation of ‘Actuary Report’, valuation balance sheet, Repo transactions, Investment in a company /body corporate owned or controlled by promoter, Government Securities Lending and Investment in private limited companies.

The Authority invites comments from insurers, promoters, investors, professional bodies, legal experts, policyholders, and all other stakeholders on the proposed amendments.

2. Existing Regulatory Framework: IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations,2024

3. Objectives of the Proposed Amendments:

The proposed amendments seek to align the existing regulatory framework with the revised provisions of the Insurance Act, 1938 (the Act) and facilitate a transparent, growth-oriented, and globally aligned insurance ecosystem while ensuring continued protection of policyholder interests.

4. Key amendments proposed are as under:

4.1 Schedule-I of the Regulations:

The newly inserted Section 12A of the Act requires that the eligibility criteria and experience for the appointment of an Actuary by an Insurer, and the powers and functions of the Actuary, shall be specified by the Regulations. In addition, the Act also requires for appointment of Actuaries by Insurers for specific purposes, subject to approval of the Authority (refer to Sections 3B, 22 and 64K of the Act).

The scope of Section 13 of the Act, which requires an Insurer to conduct an investigation into its financial condition, including the valuation of liabilities and the submission of a report thereon by an Actuary, has now been extended to all Insurers.

Scope of Section 49 of the Act, which requires that the Bonus and Dividend declaration, service of debentures shall be based on the surplus arising in the Valuation Balance Sheet (as specified by the Regulations) has been extended to all insurers.

The major changes introduced to the actuarial functions of insurers on account of the amendments are as under:

Appointment of Actuary: Eligibility Criteria, procedure for appointment, Powers and Functions for Certifying Actuary of Foreign Reinsurance Braches (FRBs) and Actuary appointed for other specific purposes as per the Act.
Actuary Report: All Insurers (including FRBs) carrying on general, health and reinsurance class of business shall submit (a) Financial Condition Report (FCR) detailing the business carried out and (b) Incurred but Not Reported (IBNR) Claim Reserve Report detailing the methodology and results of valuation of liabilities.
Valuation Balance Sheet: For all Insurers (including FRBs) carrying on general, health and reinsurance class of business, procedure for determination and distribution of surplus and format of new Valuation Balance Sheet.

4.2 Schedule-III of the Regulations:

Earlier Sections 27A, 27B, 27C and 27D of the Insurance Act prescribing investment requirements, exposure norms and approved investment categories have been replaced with Section 27. Major changes introduced pertaining to the investment function of insurers pursuant to amendments to the Act are as under:

Repo transactions: To facilitate liquidity management, the repo transactions for life insurers is proposed to be allowed.
Government Securities Lending: To enable Insurers to generate additional income in the form of Lending Fees with their surplus Govt. Securities, Government Securities lending is proposed to be allowed.
Investment in a company /body corporate owned or controlled by promoter: Insurer may invest not more than 5% of the investment assets in a company or body corporate which is owned or controlled by the promoter. Further, an insurer shall not have investments of more than 5% in aggregate of its investment assets in all companies belonging to the promoters’ group.
Investment in private limited companies: Insurers may invest not more than 5% of Shareholders’ Fund available beyond solvency margin in private limited companies with a minimum net worth of Rs.25 Cr and reported net profit.

5. Invitation for Comments

IRDAI invites comments and suggestions from insurers, promoters, investors, professional bodies, policyholders and other stakeholders on the proposed amendments and the accompanying exposure draft of IRDAI (Actuarial, Finance and Investment Functions of Insurer), (Second Amendment) Regulations, Exposure draft of the Regulation is as per Annexure 1. Stakeholders may submit their comments on the Exposure Draft in the format specified in Annexure 2.
Comments may be submitted to actuarial-policy@irdai.gov.in with a copy marked to investments@irdai.gov.in on or before 10t^h July, 2026.

This Consultation Paper is issued for public and industry comments.

Annexure-1

Exposure Draft

Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) (Second Amendment) Regulations, 2026

In exercise of the powers conferred by clauses (f), (g), (gc), (h), (i), (ia), (ib), (y), (z), (za), (zd) and (zab) of sub-section (2) of section 114A, Sections 11, 12A, 13, 20, 27, 27E, 28, clause (a) of sub-section (3) of section 29, 49, 64V, 64VA and 119 of the Insurance Act, 1938, (4 of 1938) and section 14 and 26 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), the Authority, in consultation with the Insurance Advisory Committee, hereby makes following amendments to Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 namely:

1. Short Title and Commencement:

a. These Regulations may be called Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) (Second Amendment) Regulations, 2026.

b. These Regulations shall come into force on the date of their publication in the official Gazette.

2. Objectives: The objective of these regulations is to amend the principal regulations, Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 in line with the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025.

3. Chapter III of principal Regulations: For Regulation 7, the following Regulation shall be substituted, namely:

7. Power to issue circulars, guidelines and directions

The Competent Authority may issue from time to time circulars, guidelines and directions relating to these regulations, if necessary including but not limited to, with profit committee, applicable norms in respect of appointment of Actuary(ies), Foreign Re-insurer’s Branches, detailed information to be obtained in relation to the statements appended to the Actuary Report, submission of any other additional forms or statements with respect to Life insurance, General insurance, Health insurance and Reinsurance business as applicable.

4. Throughout the principal Regulations, for the words “Actuarial Report and Abstract”, the words “Actuary Report” shall be substituted.

SCHEDULE-I ACTUARIAL FUNCTIONS

5. In Clause 1 of Part I of the Schedule I of principal Regulations, after sub clause 1(3), the following sub Clauses shall be inserted, namely:

(4) “Appointed Actuary” means an Actuary appointed by the insurer other than Foreign Re-insurer’s Branch under Section 12A of the Act as per the criteria specified under these Regulations;

(5) “Certifying Actuary” means an Actuary appointed by the Foreign Re-insurer’s Branch under Section 12A of the Act as per the criteria specified under these Regulations;

(6) “Actuary for specific purposes” means an Actuary appointed by the insurer for the purposes of Section 3B or 22 or 64K under Section 12A of the Act as per the criteria specified under these Regulations.

6. In Part II of the Schedule I of principal Regulations:

a. The heading “Appointed Actuary” shall be substituted as “Appointment of Actuary”

b. For clause 1, the following clause shall be substituted, namely:

1. Appointment of Appointed Actuary by insurers other than FRBs:

(1) Every insurer shall appoint the Appointed Actuary with prior approval of Competent Authority subject to satisfying the eligibility criteria and experience specified under Clause 2(1) of Part II of Schedule-I these Regulations.

(2) The powers and functions of the Appointed Actuary shall be as specified under Clause 6 and 7 of Part II of Schedule-I these Regulations.

c. Throughout Part II of Schedule-I of principal Regulations, for the words “Duties and Obligations”, “duties, obligations”, “functions and duties” and “duties”, the word “Functions” shall be substituted.

d. For Sub Clause 7(12)(i), the following Sub Clause shall be substituted, namely:

(i) Certifying the Actuary Report and other returns as required under sections 13 and 49 of the Act;

e. After Sub Clause 7(13) (vi), the following Sub Clause shall be inserted, namely:

(vii) Certifying the Actuary Report and other returns as required under sections 13 and 49 of the Act;

f. For Clause 10, the existing clause shall be substituted with the following, namely:

10. Applicability to reinsurance business

(1) Appointment of Appointed Actuary

(i) Every Indian Re-insurer shall appoint the Appointed Actuary for Life reinsurance business and General reinsurance business separately with prior approval of Competent Authority subject to satisfying the eligibility criteria and experience specified for life insurer and general insurer respectively under Clause 2(1) of Part II of Schedule-I of these Regulations.

(ii) The powers and functions of the Appointed Actuary shall be as specified under Clauses 6 and 7 of Part II of Schedule-I of these Regulations.

(2) Every Foreign Re-insurer’s Branch registered to carry on reinsurance business in India shall appoint “Certifying Actuary” for Life reinsurance business and General reinsurance business separately as per the criteria specified under Clause 10(3) of Part II of Schedule-I these Regulations and shall intimate such appointment to the Competent Authority within seven days of such appointment.

(3) A person shall be eligible to be appointed as Certifying Actuary if he or she satisfies with the following conditions:

(i) Fellow member of the Institute of Actuaries of India;

(ii) A person who possesses valid Certificate of Practice (COP)issued by the Institute of Actuaries of India in General Insurance and Life Insurance business in order to certify the returns and reports of General and Life reinsurance businesses respectively;

(iii) Not over the age of 70 years as at the date of certification of such reports;

(iv) A person having at least 5 years’ relevant post qualification experience in respective areas;

(v) Not an employee of any other insurer or re-insurer in India;

(vi) A person who has not committed any professional or other misconduct;

(vii) Not a person adjudicated bankrupt during the last ten years;

(viii) The Certifying Actuary shall not simultaneously work in the same capacity of any other FRB or as Appointed Actuary for any other insurer or re-insurer.

(ix) The Certifying Actuary shall function in accordance with these regulations, and he or she shall not function in any other capacity which could result in conflict of interest in performing his or her role as Certifying Actuary in accordance with these regulations.

(x) The FRB and the Certifying Actuary shall comply with the provisions of clause 10(3)(ix) of Part II of Schedule-I of these regulations at all times while certifying the Reports and Statements as prescribed in these Regulations.

(4) Powers of Certifying Actuary

(i) A Certifying Actuary shall have access to all such information and documents in possession or under control, of the FRB if such access is necessary for the proper and effective performance of the functions of the Certifying Actuary.

(ii) The Certifying Actuary may seek any information for the purpose of clause 10(4)(i) of Part II of Schedule-I of these regulations from any officer or employee of the FRB.

(iii) The Certifying Actuary shall be entitled to make statement to the FRB:

(a) that relates to the actuarial advice given to the directors and (or) Executive Committee of Management;

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

(iv) A Certifying Actuary shall be entitled to make any statement to FRB, for the purpose of the performance of his or her functions as Certifying Actuary. This is in addition to any other privilege conferred upon a Certifying Actuary under any other regulations.

(v) No provision of the letter of appointment of the Certifying Actuary, shall restrict or prevent his or her functions and powers under these regulations.

(5) Functions of Certifying Actuary

(i) Ensuring 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 FRB;

(ii) Certifying the Actuary Report and other returns as required under section 13 of the Act;

(iii) 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;

(iv) 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;

(v) Drawing the attention of management of the FRB, to any matter on which he or she thinks that action is required to be taken by the FRB to avoid any contravention of the Act;

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

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

(viii) While performing his or her functions, the Certifying Actuary shall:

(a) carryout his or her responsibilities in individual capacity

(b) along with FRB, ensure that there is no conflict of interest while certifying the Reports and Statements as prescribed in these Regulations

(ix) In addition to the above, functions of a Certifying Actuary of an FRB carrying on life reinsurance business shall include:

(a) Certifying that the mathematical reserves have been determined in the manner prescribed in Part V of Schedule-I of these regulations and taking into account the Guidance Notes /Actuarial Practice Standard issued by the Institute of Actuaries of India and any directions given by the Authority;

(b) Coordinating the calculation of mathematical reserves;

(c) Ensuring the appropriateness of the methodologies and underlying models used, as well as the assumptions made in the calculation of mathematical reserves;

(d) Assessing the sufficiency and quality of the data used in the calculation of mathematical reserves;

(e) Informing the Board and (or) Executive Committee of Management of the FRB about the reliability and adequacy of mathematical reserves;

(x) In addition to sub clauses 5(i) to 5(viii) of Clause 10 of Part-II of Schedule-I of these regulations, the functions of a Certifying Actuary of an FRB carrying on General or Health reinsurance business shall include:

(a) Certifying that claims reserves including reserves for incurred but not reported claims (IBNR) and other reserves (including reserves for incurred but not enough reported claims (IBNER) and premium deficiency reserve (PDR)) have been determined using actuarial principles and in the manner prescribed in Part V of Schedule-I of these regulations;

(b) Coordinating the calculation of reserves for IBNR and other reserves (including reserves for IBNER and PDR);

(c) Assessing the sufficiency and quality of the data used in the calculation of reserves for IBNR and other reserves including reserves for IBNER and PDR;

(d) Informing the Board and (or) Executive Committee of Management of the FRB about the reliability and adequacy of IBNR and other reserves including reserves for IBNER and PDR;

(xi) While carrying out his or her functions, the Certifying Actuary shall pay due regard to generally accepted actuarial principles and practices;

(xii) The Certifying Actuary shall inform the Competent Authority of any disciplinary proceedings initiated against him or her by any entity within seven days from the date of such initiation.

g. After Clause 10, the following Clause shall be inserted, namely:

11. Appointment of Actuary for specific purposes of Sections 3B, 22 and 64K of the Act:

(1) Eligibility Criteria

(i) The Actuary appointed for the purposes of Sections 3B or 64K of the Act shall satisfy all the eligibility criteria applicable for Appointed Actuary for a life insurer as stipulated under clause 2(1) of Part II of Schedule – I of these Regulations other than the criteria stipulated under the sub clause 2(1)(vi).

(ii) The Actuary appointed for the purposes of Section 3B of the Act for life reinsurance business of an Indian re-insurer shall satisfy all the eligibility criteria applicable for Appointed Actuary for a life insurer as stipulated under clause 2(1) of Part II of Schedule – I of these Regulations other than the criteria stipulated under the sub clause 2(1)(vi).

(iii) The Actuary appointed for the purposes of Section 3B of the Act for life reinsurance business of an FRB shall satisfy all the eligibility criteria applicable for Certifying Actuary for the life reinsurance business as stipulated under clause 10(3) of Part II of Schedule – I of these Regulations

(iv) The Actuary appointed for the purposes of Section 22 of the Act by an insurer other than FRB, shall satisfy all the eligibility criteria applicable for Appointed Actuary for life insurer or general insurer or health insurer or Indian re-insurer, as the case may be, as stipulated under clause 2(1) of Part II of Schedule – I of these Regulations other than the criteria stipulated under the sub clause 2(1)(vi).

(v) The Actuary appointed for the purposes of Section 22 of the Act by an FRB shall satisfy all the eligibility criteria applicable for Certifying Actuary for life reinsurance or general reinsurance business as the case may be, as stipulated under clause 10(3) of Part II of Schedule – I of these Regulations

(2) The Actuary shall carryout his or her responsibilities in individual capacity.

(3) The Insurer and the Actuary shall ensure that there is no conflict of interest while carrying out the functions for the purposes of referred Sections of the Act.

(4) Powers of the Actuary: The Actuary shall have access to all such information and documents in possession or under control, of the insurer if such access is necessary for the proper and effective performance of the functions as specified in the respective Sections of the Act.

(5) The Actuary shall ensure compliance with these Regulations and other regulations, circulars, guidelines issued by the Authority as well as Actuarial Practice Standards/ Guidance Notes issued by the Institute of Actuaries of India.

(5) The procedure for appointment of such actuary shall be governed in accordance with clauses 2(3) to 2(6) of Part II of Schedule-I of these regulations.

(6) The Competent Authority may, on request of the insurer, grant relaxation for one or more conditions.

(7) Provided, in respect of insurers other than FRBs, there shall be no relaxation in respect of conditions under clause 2(1)(ii), 2(1)(vii) and 2(1)(ix) of Part II of Schedule-I of these regulations.

Provided further, in respect of FRBs, there shall be no relaxation in respect of conditions under clause 10(3)(i), 10(3)(ii) and 10(3)(vi) of Part II of Schedule-I of these regulations.

(8) Obligations of Insurer: The insurer shall ensure that the Actuary is provided with full and accurate particulars to discharge his or her functions.

(9) Cessation of Appointment of Actuary appointed for specific purpose:

(i) The Actuary shall be given a notice of withdrawal of approval by the Competent Authority on the following grounds:

(a) that he or she ceases to be eligible in accordance with clause 11(1) of Part II of Schedule-I of these regulations, or

(b) that he or she has, in the opinion of the Competent Authority, failed to perform adequately and properly the functions of the Actuary appointed for the specific purpose under these regulations.

(ii) The Competent Authority after serving a notice to such Actuary shall grant an opportunity of being heard and thereafter issue appropriate order either withdrawing approval or revocation of the notice issued.

(iii) If the Actuary makes formal intimation to the insurer to cease to be an Actuary of the insurer otherwise than on the grounds mentioned in clause 11(9)(i) of Part II of Schedule-I of these regulations, the insurer and the Actuary shall intimate the Competent Authority the reasons thereof within one week of the date of such intimation to the insurer.

7. Throughout Part III of Schedule I of principal Regulations, for the word “Abstract”, the word “Report” shall be substituted. For Part III(B) of Schedule I of principal Regulations, the heading shall be substituted as “Actuary Report for Life Insurance Business as stipulated under the Section 13 of the Act.”

(8) After Clause 1(3) of Part III(B) of Schedule-I of principal Regulations, the following section shall be inserted:

(4) The Actuary Report shall be signed in the case of a company by the chairperson and two directors and by the principal officer of the company and, if the company has a managing director by that managing director and by the actuary who made the valuation.

9. In Part IV of Schedule-I of principal Regulations:

a. Under the heading, Valuation of General Insurance Business, the section “(A) Assets, Liabilities and Solvency Margin” shall be inserted before Clause 1.

b. After the Clause 2(4) of Part IV(A), the following clause shall be inserted:

(4A) Determination of Surplus (also referred to as Actuarial Surplus or Valuation Surplus)

(I) Appointed Actuary of general insurer or standalone health insurer, shall determine the actuarial surplus (also referred to as valuation surplus) arising out of a valuation of assets and liabilities made for a financial year in accordance with Part IV of Schedule-I of these regulations.

(2) Every general insurer and standalone health insurer shall report the Valuation Surplus as determined above in Form IRDAI-GI-I as specified in Annexure-Actl-17.

c. In the Clause 2(5) of Part IV(A):

i. In the sub clause 5(iii), after the words “with Annexure Actl- 12.”, the words “and Statement of Surplus in Form IRDAI-GI-I in accordance with Annexure-Actl-17.” shall be inserted.

ii. In the sub clause 5(v), for the words “and FORM IRDAI-GI-SM”, the words “, FORM IRDAI-GI-SM and FORM IRDAI-GI-I” shall be inserted.

d. After the Clause 6 of Part IV(A), the following section shall be inserted:

(B) Actuary Report and Statements as stipulated under the Section 13 of the Act

1. The Actuary Report and forms shall be prepared and furnished to the Authority in the format as specified below.

(i) Financial Condition Report in the format as specified in Annexure Actl-15

(ii) IBNR Claim Reserve Report in format as specified in Annexure Actl -16

2. The Report and forms as referred in clause 1 of Part IV(B) of Schedule-I of these regulations shall be furnished to the Authority, within three months from the end of the period to which they refer to or within thirty days from the date of adoption of accounts by the Board of the insurer, whichever is earlier, along with any other reports as may be specified by the Competent Authority from time to time.

3. The Actuary Report as specified under clause 1 of part IV(B) of Schedule-I of these Regulations shall be signed in the case of a company by the chairperson and two directors and by the principal officer of the company and, if the company has a managing director by that managing director and by the actuary who made the valuation.

10. In Part V of the Schedule I of principal Regulations:

a. Before Clause 1, the following shall be inserted namely:

(A) Assets, Liabilities and Solvency Margin.

b. After the Clause 4 of Part V(A), the following clause shall be inserted:

(4A) Determination of Surplus (also referred to as Actuarial Surplus or Valuation Surplus)

(1) Appointed Actuary(ies) of Indian re-insurer and Certifying Actuary(ies) of Foreign Reinsurer’s Branch, shall determine the actuarial surplus (also referred to as valuation surplus) arising out of a valuation of assets and liabilities made for a financial year in accordance with Part III and Part IV of Schedule-I of these regulations.

(2) Every Indian re-insurer and Foreign Reinsurer’s Branch shall report the Valuation Surplus as determined above in Form IRDAI-RI-I as specified in Annexure-Actl-17A.

c. In the Clause 5 of Part V(A) of Schedule-I:

(i)In sub clause 1(i), for the words “Statements of Liabilities (Annexure Actl-1)”, the words “Statements of Liabilities (Annexure Actl-1)other than Form IA-NPAR, Form IA-PAR, Form AA” shall be substituted.

(ii) After sub clause 3(ii), the following shall be inserted:

Valuation Balance Sheet- Form IRDAI-RI-I (Annexure Actl- 17A)

(iii) In sub clause (4), for the words “Part V”, the words “Part V(A)” shall be substituted.

d. The Clause 6 of Part V(A) of Schedule I of the Regulations shall be omitted. After the Clause 5 of Part V(A), the following section shall be inserted namely:

(B) Actuary Report as stipulated under the Section 13 of the Act:

1. The Actuary Report shall be prepared and furnished to the Authority in the format as specified below:

(1) Indian re-insurers:

(i) Actuary Report for Life reinsurance business shall be prepared in accordance with provisions under Part III (B) with applicable statements as referred under Clause 5(1) of Part V(A) of Schedule-I of these Regulations.

(ii) Actuary Report for General reinsurance business in the format of Financial Condition Report as specified in Annexure – Actl 15 along with IBNR Reserve in format as specified in Annexure –Actl 16.

(iii) The Actuary Report as specified under clause 1(1)(i) and 1(1)(ii) of part V(B) of Schedule-I of these Regulations shall be signed in the case of a company by the chairperson and two directors and by the principal officer of the company and, if the company has a managing director by that managing director and by the actuary who made the valuation.

(2) Foreign Re-insurer’s Branches

(i) Actuary Report for Life reinsurance business shall be prepared in accordance with provisions under Part III (B) with applicable statements as referred under Part V(A) of Schedule-I of these Regulations.

(ii) Actuary Report for General reinsurance business in the format of Financial Condition Report as specified in Annexure Actl-15A and IBNR Reserve Report in format as specified in Annexure Actl-16.

(iii) The Actuary Report as specified under clause 1(2)(i) and 1(2)(ii) of part V(B) of Schedule-I of these Regulations shall be signed by the Chief Executive Officer (CEO), the Chief Financial Officer (CFO) and the actuary who made the valuation.

(iv) The Report and forms as referred in clause 5 of Part V(A) and Clause 1 of Part V(B) of Schedule-I of these regulations shall be furnished to the Authority, within three months from the end of the period to which they refer to or within thirty days from the date of adoption of accounts by the Board of the reinsurer, whichever is earlier, along with any other reports as may be specified by the Competent Authority from time to time.

SCHEDULE III – INVESTMENT FUNCTIONS

1. Throughout the principal Regulations, for the words and figures “Section 27A(2)”, the words ““Proviso to Section 27(1)”” shall be substituted.

2. In the clause 2 of Part II of the Schedule III of principal Regulations

a) in the sub-clause (1) for the word and figures “Sec 27A”, the word and figures “explanation (iii) to the Section 27(10)” shall be substituted and for the word and figures “Sec 27(2)” the word and figures “explanation (i) to the Section 27(10)” shall be substituted.

b) in the sub-clause (3) the word and figures “ to comply with the provisions of Section 27A (2) (ii) of the Act” shall be omitted.

3. In clause 4 of Part II of the Schedule III of principal Regulations the figures and letter “27A” shall be omitted.

4. In clause 5 of Part II of the Schedule III of principal Regulations the figures and letter “27A” shall be omitted.

5. In clause 6 of Part II of the Schedule III of principal Regulations the figures and letter “27A” shall be omitted.

6. In clause 7 of Part II of the Schedule III of principal Regulations the figures and letter “27B” shall be omitted.

7. In clause 8 of Part II of the Schedule III of principal Regulations the figures and letters “27A”, “27B” and “27C” shall be omitted.

8. In clause 8 of Part II of the Schedule III of principal Regulations, the following note shall be inserted after note IV.

IV(a): Notwithstanding the provisions mentioned in the note IV above, Insurers are allowed to invest a maximum 20% of the debt issued by Public Limited Special Purpose Vehicle engaged in infrastructure sector or amount under clause 8(2)(a), whichever is lower, as a part of Approved Investments, provided:

i. The underlying project has commenced commercial operation and cash flows have stabilized;

ii. The proceeds of the issue are utilized to refinance the existing debt/loan of SPV;

iii. The debt/loan is treated as standard in the books of the lender;

iv. The debt issued shall have minimum credit rating of AA;

v. The SPV shall disclose on quarterly basis, the cash flows generated from the project to the insurer;

vi. The insurer in their financial statements shall disclose the following details;

a. the name of SPV;

b. the amount invested in debt of SPV;

c. the tenure of the debt;

d. the coupon rate of interest on the debt;

e. Commercial Operation Date.

9. In clause 8 of Part II of the Schedule III of principal Regulations, the following note shall be substituted for note VII.

Note VII: Subject to exposure limits mentioned in the table above, an insurer may invest not more than five percent (5%) of the assets of its investment assets in a company or other body corporate which is owned or controlled by the promoters. Further, an insurer shall not have investments of more than 5% in aggregate of its investment assets in all companies belonging to the promoters’ group. Investment made in all companies belonging to the promoters group shall not be made by way of private placement (except QIPs of BSE100/NSE100 companies and Central Public Sector Enterprises) or in unlisted instruments (equity, debt, certificate of deposits and fixed deposits held in a Scheduled Commercial Bank), except for companies formed by Insurers under Note XII to clause 8.

10. In clause 8 of Part II of the Schedule III of principal Regulations, the following notes shall be inserted after note XIII.

Note XIV: Investment in Private Limited companies: Insurers may invest not more than 5% of the shareholders’ funds available beyond solvency margin, in equity or debt instruments of private limited companies, subject to the following conditions:

i. The Exposure and Prudential norms specified under clause 8 are to be complied with respect to such investments.

ii. The investee company shall have a net worth of minimum Rs. 25 Crore and reported net profit for at least two years out of three preceding years.

iii. No investments shall be made in private limited companies belonging to promoters’ group of the insurer.

Note XV: Repo and Government Securities Lending Transactions. Insurers are allowed to participate in Repo and Government Securities Lending Transactions subject to the following conditions:

i. The gross combined limit for Repo and Government Securities Lending at any point of time is 10% of Government Securities available after meeting the applicable pattern of investment requirements specified under the clauses 4, 5 and 7 or Rs. 10,000 crores, whichever is less.

ii. Extant RBI directions applicable for Repo and Government Securities Lending are to be complied.

Note XVI: Reverse Repo transactions.

i. In case of Life Insurers, the exposure to reverse repo transactions in Corporate Debt Securities at any point of time shall not exceed 10% of all funds taken together. Further, at individual Segregated Fund level [SFIN], the exposure should not exceed 10% of such fund size [SFIN].

ii. In case of General Insurer including an insurer carrying on business of reinsurance or health insurance or in case of a branch of a foreign company engaged in the business of re-insurance the exposure to Reverse Repo transactions in Corporate Debt Securities shall not exceed 10% of Investment Assets of the Insurer.

iii. Reverse Repo transactions in Corporate Debt securities are subject to exposure and prudential norms specified under clause 8.

iv. For Reverse Repo transaction in Govt. Securities the 10% Investment limit specified above is not applicable.

11. In Form – 6 of Annexure INV-III to the Clause 9 of Part III of the Schedule III of principal Regulations the figures and letter “27(A)(5)” the word and figures “proviso to Section 27(2)” shall be substituted.

12. In the sub-clause (6) of clause 12 of Part III of the Schedule III of principal Regulations for the word and figures “Section 27A”, the word and figures “explanation (iii) to the Section 27(10)” shall be substituted and for the word and figures “Sec 27(2)” the word and figures “explanation (i) to the Section 27(10)” shall be substituted.

SCHEDULE – V: INSPECTION AND SUPPLY OF RETURNS

1. For Clause 1 of Schedule V of the Principal Regulations, the following clause shall be substituted, namely:

1. Inspection and Supply of Returns / Documents:

(1) Any person:

(a) seeking inspection of any return or a copy of any return under Section 20 (1) of the Act; or

(b) seeking inspection of document or copy of document under section 119 of the Act;

shall make an application to the Authority in such manner as may be specified by the Competent Authority.

Annexure Actl-15

(See Clause 1(i) of Part IV (B) of Schedule-I of IRDAI (Actuarial, Finance and Investment functions of insurers) Regulations, 2024)

The Financial Condition Report (FCR) shall be submitted annually in the following format. In addition, the insurer shall submit the FCR tables as per Part-B:

Part A

1. The Objectives:

(i) The objective of Financial Condition Report (“FCR”) is to investigate the entire general insurance business carried on by the insurer as on the date of valuation and to report the strengths and weaknesses in terms of the risk the insurers carry with respect to meeting solvency requirements, profitability, liquidity, expense, investment return, asset-liability mismatch, insurer’s future position, other risks-specific to the business etc.

(ii) This report shall specifically address:

(a) The sensitivity of the future solvency position to potential changes in the economic environment, claims experience, pricing strategy and all other relevant factors, if any

(b) Building of early warning signals to assess the financial condition

2. Lines of Business

(i) It is recommended that Actuary must necessarily analyze and comment on the each of the LOB stated under clause 2(2)(ii)(a) of Part IV(A) of Schedule I of IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024.

(ii) In addition, Actuary must analyze and comment on any product that is material from the perspective of financial condition of the insurer. For the sake of uniformity amongst insurers, a material line of business may be defined as under:

(a) Motor Third party, whether written as part of a Motor package policy or Motor Act Only policy, regardless of the size, and

(b) Any product which meets any one of the following criteria:

(1) It contributed to 5% or more of company’s total GWP during the reporting period,

(2) It contributes to 5% or more of company’s NWP,

(3) It contributes to 5% or more of company’s Gross Incurred Claims,

(4) It contributes to 5% or more of company’s Net Incurred Claims. AND

(5) Any other product or line of business which Actuary believes is material to the financial condition of the insurer.

(iii) Actuary may produce any other data or table that he/she believes aids in the analysis &/or presentation of financial condition of the company.

3. Instructions:

(i) The Actuary shall ensure the following:

(a) The format and tables stipulated in this document shall be adhered to without any alteration. The fields which are not relevant shall not be left blank, but shall state “not applicable” or “NA”.

(b) The numbers provided in the FCR shall be:

(1) Reconciled with the financial statements of accounts and IBNR, wherever applicable.

(2) Provided in unit of thousands

(3) All outgo entries in the Annexure of FCR shall be shown in brackets ( )

(ii) The sequential order in the LOB table shall be strictly followed.

(iii) The Actuary shall provide detailed analysis along with the actions proposed, if any, on each section of the FCR.

Section 1: Executive summary

1.1 The executive summary shall summarize the report in a way so that the recipient of the report becomes acquainted with the large body of material to follow without having to go through it in detail.

1.2 The audience of FCR is Board of the insurance Company and the Regulator. This has to be borne in mind when the Executive Summary is prepared. The essence of the whole report needs to be succinctly captured in this section.

1.3 The Actuary shall explain the adequacy of reserving (i.e. IBNR, Outstanding Claims Reserve, Unearned Premium Reserve, Premium Deficiency Reserve, etc.).

Section 2: Financial Analysis & Future Projection

2.1 Actuary is expected to provide an enterprise level analysis of the current financial position and is expected to give a quick snapshot and set the context for the subsequent sections of the report

2.2 The following aspects are expected to be covered

(a) Performance in the financial year

(b) Financial analysis and comparison with what was budgeted – Income statement, Balance sheet and key ratios to be analyzed and actual versus expected analysis to be performed

(d) Industry comparison – Key parameters to be benchmarked with industry information available as on date of preparation of report

(e) Major events that had taken place during the year relevant to the operations of the insurer or the promoter companies (e.g. mergers, acquisitions, a new business activity, significant financial loss, changes in the company structure, etc.)

(f) Financial highlights from the latest published financial statements of the promoter companies (assets, liabilities, profits for the year, etc.)

2.3 Format for the representation of company financials is given in Part B .

Section 3: Enterprise Business Analysis

In this section Actuary shall provide analysis on a more granular level including LOBs, Geography, Channel, Type of Customer (Retail/Commercial) or in any other manner deemed appropriate by Actuary so that the key issues are highlighted.

Analysis could pertain to:

3.1 Profitability – trends in ICR, COR, Expense ratio, Commission ratio etc. Comments if any on the expense allocation methodology may also be made in this section.

3.2 Reserve adequacy – Development of Ultimate Loss for an accident year over the next few years needs to be provided based on the data in the required format. Significant deviations (positive or negative) need to be explained.

3.3 Reinsurance structure including retention ratio. Comments on reinsurance arrangement for the next year (based on the proposed Rl policy) need to be made. Actuary’s views on changes in the proposed policy compared to previous year needs to be highlighted. A three-year analysis of ceded business is needed.

3.4 Grievances – Actuary’s comments on data on customer grievances and steps to be taken from a policyholder protection point of view needs to be emphasized

3.5 Sufficiency and quality of data : Actuary’s comments on the sufficiency and quality of the data used in the calculation of IBNR and other reserves (including IBNER and PDR) where actuarial advice is sought by the Authority.

3.6 Data deficiency reserve: If the Actuary feels that there is a need to setup data deficiency reserve, comments about the same can be made in this section.

3.7 Consistency: Actuary’s comments on consistency between pricing policy, underwriting policy and reserving policy of the insurer.

3.8 Appropriateness of methodologies: The Actuary’s comments on the appropriateness of the methodologies and underlying models used, as well as the assumptions made in the calculation of IBNR and other reserves (including IBNER and PDR).

3.9 Reliability and adequacy of calculation of IBNR: The Actuary’s comments on the reliability and adequacy of the calculation of IBNR and other reserves (including IBNER and PDR) where actuarial advice is sought by the Authority.

Section 4: Analysis of material lines of business (LOB)

4.1 A material line maybe defined as a LOB which is 5% of GWP, 5% of NWP, 5% of NIC of the reporting year or any other LOB which the Actuary considers to be critical to the company from an FCR point of view. The Actuary’s comments on the foreign operations of the company, if material, should also be included in this section based on the information available to him/her.

4.2 The following points may be included in the analysis pertaining to this section for each material LOB:

(a) Growth over the years

(b) Future projection

(d) Loss ratio trends

(e) Premium adequacy

(f) Reinsurance policy

(g) Reserving adequacy

(h) Commentary on Expense Allocations, its appropriateness, compliance to IRDAI (Expenses of Management, including Commission of Insurers) Regulations, 2024 and Section 40B and 40C of Insurance Act.

(i) Profitability

(j) Renewal analysis (for retail lines)

(k) Impact of the LOB on to the financial condition of the company

(l) The tables to be prepared is given in Part B

Section 5: Investments & Asset Liability Management

This section should include Actuary’s comments on the following:

5.1 Current investment portfolio and strategy being followed.

5.2 Actuary’s comments on the proposed investment policy for the next year especially the changes in the policy compared to last year

5.3 Analysis of the portfolio from an ALM perspective as on 31st March

5.4 ALM to be done as on 31st March on a run off basis. Formats for ALM working is given in Part B.

Section 6: Current & Future Solvency and Estimation of Economic Capital

6.1 This is a critical chapter wherein the Actuary is expected to discuss about the current and future solvency position of the company.

6.2 The Actuary is expected to perform stress/scenario testing (which he/she deems appropriate from the company’s point of view) to analyze the possible movement of solvency ratio at various levels of confidence.

6.3 The scenario/stress testing is expected to be performed on the business projections given earlier.

6.4 If the Authority prescribes any specific stress/scenario test to be done for all the players in the industry then that also needs to be included in this section.

6.5 Actuary shall estimate the Economic Capital and submit the related disclosures as specified by the Competent Authority.

Format to represent the results from scenario / stress testing is given in Part B.

Scenarios are to be explicitly mentioned by the Actuary

Section 7: Risk Management

7.1 In this section, the Actuary shall focus on identification of potential risks faced by the insurer both on a gross and net basis in a comprehensive manner along with mitigation and impact on the company.

7.2 Ideally, the overall characterization shall include the various key risk accumulations, be they by exposure lines or operational units, etc., per the Actuary’s discretion. In addition, shall characterize individually those accumulations that are material. For instance, Third Party exposure is a significant accumulation in its own merit for insurers that write Motor business. The Actuary shall opine how the overall risk characteristics of the insurer compare with the stated risk appetite approved by the insurer’s board of directors.

7.3 The Actuary shall discuss the following point-wise

(a) The material lines of business written

(b) The material reserves arising from lines in run-off (if any)

(d) Risk Concentration. Region wise, product wise, line of business wise, distribution channel wise, any other factor deemed material by the Actuary, etc.

(e) Key trends or factors that have or may have a significant impact on the financial condition of the company

(f) The impact arising out of the company’s operational practices like discounts, response to market competition, reserving practices, catastrophes, business volume, etc.

7.4 Risk Characterization

The Actuary shall characterize the risk faced by the company with the help of:

(a) Accumulation of risk exposures under different categories that pose a material threat to the company’s financial condition. To the extent possible, the risk categories should be mutually exclusive and jointly exhaustive but the over-riding factor is to include all groupings that can lead to a large scale impact on the company. The Actuary shall define the materiality of the groupings — potential financial impact as a percent of net worth. Operational risk and Investment Risk shall be modeled independently from the underwriting exposure categories to the extent that their impact is not included in the underwriting groupings. For example, risks arising out of TPA operations could be included as part of the underwriting risk or separately as an operational risk

(b) It is desirable that the Actuary augments his analysis by constructing a “variance co-variance” matrix and provide the basic statistical measures. Minimally, given the tail length of certain key category risks a multivariate log normal distribution can be modeled on the data.

7.5 Risk management and mitigation

(a) The Actuary shall evaluate the capacity of the company to handle the underlying risk.

(b) An overview of the risk management functions with special focus on the chain of command employed in accepting and managing risks.

(d) The risk return trade-off guiding the company’s underwriting and investing operations including the overarching characteristics of the implemented protection structure including reinsurance contracts.

(e) Risk monitoring procedures, review process and feedback loop.

(f) Contingency plans for emerging risks and the development of latent claims (if any).

(g) Development of necessary structural changes in pricing and reserving methodologies as a function of the risk performance of the company.

7.6 Sensitivity

At the enterprise level, the Actuary shall perform following sensitivity analysis, scenario analysis and present the result in the format provided in Part – B. Such stress test shall, at minimum, cover the following parameters:

(a) Scenario 1: Fall of market value of equity investments by 20% compared to the base scenario.

(b) Scenario 2: Increase in market value of equity investments by 20% compared to the base scenario.

(d) Scenario 4: Rise in interest rate on debt investments by 100bps compared to the base scenario.

(e) Scenario 5: Decrease of Ultimate Loss Ratio by 20% (multiplicative) compared to the base scenario.

(f) Scenario 6: Increase of Ultimate Loss Ratio by 20% (multiplicative) compared to the base scenario.

The Actuary shall define explicitly the base & the pessimistic scenarios assumed in arriving at the projections and discuss point-wise the following:

(a) In addition to above scenarios, the sensitivity of the business to the key risk exposures.

(b) The methods and assumptions used to assess the sensitivities.

Section 8: Reinsurance

In this chapter the Actuary shall discuss the following

8.1 Reinsurance program of the company in the past year and its adequacy.

8.2 Reinsurance program for the forthcoming year.

8.3 Changes with respect to previous year’s program to be highlighted.

8.4 Actuary may also include a table along with details and analysis of treaties.

8.5 Actuary’s recommendations.

Section 9: Comments of the Board of the Insurer and Actions taken Report The insurer shall provide the following under this chapter:

9.1 The date and place of board meeting where the report was presented

9.2 Whether formally presented or tabled or sent by circulation

9.3 Comments of the Board and proposed course of action, if any on the any part of the FCR or issues raised by Actuary

9.4 If the presentation happens after the submission deadline then the board comments may be sent

separately to the Authority

Section 10(a): Certification by Appointed Actuary & CEO

Actuary Certification:

“I, (name of Actuary), the Actuary of (name of insurer), hereby certify,

(a) that I have complied with the provisions of the Insurance Act, 1938, Regulations, Rules and Directions of the IRDAI;

(b) that I have taken into account all contingencies appropriate to the business that is valued and that the assumptions employed in the valuation are appropriate;

(c) that the reserves for technical liabilities have been based on accurate data and have been calculated and reported accurately, subject to the following qualifications (list the qualifications, if any);

(d) that I have calculated the Required Solvency Margin accurately; and

(e) that the reserves for technical liabilities along with the Required Solvency Margin make good and sufficient provision for all the unmatured obligations under the terms of the policies on the books of the insurer.

(f) that this Financial Condition Report depicts the true underlying financial position of the insurer as on the Financial Year ending dd/mm/yyyy

Name of Insurer:

Name of Actuary:
Signature of Actuary:

CEO Certification:

I certify that full and accurate data has been furnished to the Actuary (name) for the preparation of this Financial Condition Report as on the 31st day of March of……….. (date of investigation).

Name of insurer:

Name of the CEO:

Signature of the CEO:

Place:

Date:

Company Seal:

Section 10(b): Certification by mentor (if applicable)

Mentor Certification (if applicable)

“I, (name of Mentor), the Mentor of (name of insurer), hereby certify,

(a) that I have reviewed the submission made by the Appointed Actuary.

(b) that I concur with the aforesaid submission.

Name of Insurer:

Name of Mentor:

Signature of Mentor:

Place:

Date:

Counter signed by CEO:

Place:

Date:

Company Seal:

GLOSSARY

1. Average Gross premium: Gross premium I number of exposures

2. Average net premium: Net premium / Number of exposures

3. Average Sum insured: Total sum insured / Number of exposures

4. Allocated loss adjustment expenses: correspond to those costs that the insurer is able to assign to a particular claim.

5. Combined ratio: Net commission ratio + expense ratio + Net incurred claim ratio

6. Claim Frequency: Number of incurred claims / Number of exposures

7. Claim Severity: Gross (net) Incurred claim amount / Number of Incurred claims

8. Closed claim without claim payment (number): Includes all the claims that are closed without claim payment.

9. Closed claim without claim payment (amount): (For the purpose of this report) includes claim amount of all the claims closed without claim payment exclusive of allocated loss adjusted expenses and these expenses should be included in the claims closed with payment (amount).

10. Closed claim with claim payment (number): Includes all the claims that are closed with claim payment.

11. Closed claim with claim payment (amount): (For the purpose of this report) includes claim amount of all the claims closed with payment inclusive of allocated loss adjusted expenses of both claims closed with & without payment.

12. Expense Ratio: Operating expenses / Gross written premium

13. Exposures: An exposure is the basic unit of risk that underlies the insurance premium

14. Earned Exposure Year: Exposure per unit of year of risk coverage.

15. Insurance profit: Underwriting profit + Investment income on insurance funds

16. Gross Earned Premium (GEP): Premium from direct business written + Premium on reinsurance accepted +/-Adjustment for change in reserve for unexpired risk (Definition as per annual report)

17. Gross Direct premium: Premium received from direct business written (including coinsurance premiums)

18. Gross written premium: Premium from direct business written + Premium on reinsurance accepted

19. Gross claims paid: Claim amount paid on direct business written + Claim amount paid on reinsurance accepted business

20. Gross Incurred claim: Claim amount paid (gross) + Claims outstanding (Inclusive of IBNR) amount at the end of the Financial Year (gross) – Claims outstanding (Inclusive of IBNR) amount at the beginning of the Financial Year (gross) (Definition as per annual report)

21. Gross Incurred Loss Ratio: Gross incurred claim / Gross earned premium

22. Gross claims Paid Loss Ratio: Gross claims paid / Gross earned premium

23. Gross commission: Commission paid on direct written business + Commission paid on reinsurance accepted business.

23. Net Earned Premium (NEP): Premium from direct business written + Premium on reinsurance accepted – Premium on reinsurance ceded +/- Adjustment for change in reserve for unexpired risk (Definition as per annual report)

24. Net premium: Premium from direct business written + Premium on reinsurance accepted – Premium on reinsurance ceded (Definition as per annual report)

25. Net claims paid: Claim amount paid on direct business written + Claim amount paid on reinsurance accepted business -Claim amount received from ceded business

26. Net Incurred claim: Claim amount paid (net) + Claims outstanding (Inclusive of IBNR) amount at the end of the Financial Year (net) – Claims outstanding (Inclusive of IBNR) amount at the beginning of the Financial Year (net) (Definition as per annual report)

27. Net Commission: Commission paid with respect to direct business + Commission paid with respect to Reinsurance accepted – Commission received with respect to Reinsurance ceded (Definition as per annual report)

28. Net Incurred Loss Ratio: Net Incurred claim / Net earned premium

29. Net claims paid loss ratio: Net claims paid I Net earned premium

30. Net Commission ratio: Net commission / Net Premium

31. Number of Incurred claims: Number of settled claims (i.e. claims are closed with / without payment) + open claims

32. Operating expenses: As per Schedule 4 of the Annual Report

33. Income from investments: As per Revenue account of the Annual Report

34. Premium deficiency reserve: Premium deficiency shall be recognized if the sum of expected claim costs, related expenses and maintenance costs exceeds related reserve for unearned premium reserve.

35. Retention ratio: Net Written Premium/ Gross Written Premium

36. Reporting Delay: It is time from when the event occurs through to the time that the insurance company is notified of the event.

37. Salvage and subrogation: Salvage represents consideration received by the insurer for damaged property taken over by such insurer in an insurance claim. Subrogation refers to an insurer’s right to recover the amount of claim payment to a covered insured from a third-party responsible for the injury or damage.

38. Settlement Delay: It is the time period between notification to the Company and the payment of the claim.

39. Solvency ratio: ASM I RSM (as per Regulations)

40. Tail length: Estimated time taken for settlement of claim from the date of loss occurrence

41. Underwriting profit: Net earned premium – Net incurred claims+/-Net Commission-Operating expenses-Premium Deficiency Reserve

42. Unallocated loss adjustment expenses: are the claim related expenses but cannot be allocated to a specific claim. Examples of ULAE include salaries, rent, and computer expenses for the claims department of an insurer.

43. Unearned Premium Reserve (UPR) is as defined in IRDAI (Actuarial, Finance and Investment Functions), Regulations 2024.

44. Unexpired Risk Reserve (URR): The reserves in respect of the liabilities for unexpired risks and determined as the aggregate of Unearned Premium Reserve and Premium Deficiency Reserve.

Note: Please note that the claims paid and reserves are inclusive of allocated loss adjustment expenses.

Annexure Actl-15A

Actuary Report for General Reinsurance business as stipulated under the Section 13 of the Act.

(See Clause 1(2)(i) of Part V (B) of Schedule-I of IRDAI (Actuarial, Finance and Investment functions of insurers) Regulations, 2024)

Note 1: For the purposes of this Report,

a. The term “The Actuary” refers to “Certifying Actuary” as defined under Clause 1(5) of Part I of Schedule I of IRDAI (Actuarial, Finance and Investment functions of insurers) Regulations, 2024)

b. The term “insurer” refers to the Foreign Reinsurer’s Branch (FRB) as defined in Regulation 3(4)
of Chapter-I of Insurance Regulatory and Development Authority of India (Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India) Regulations, 2024

Note 2: The Financial Condition Report (FCR) shall be submitted annually in the following format. In addition, the insurer shall submit the FCR tables as per Part-B

Part A

1. The Objectives:

(i) The objective of Financial Condition Report (“FCR”) is to investigate the entire reinsurance business carried on by the insurer as on the date of valuation and to report the strengths and weaknesses in terms of the risk the insurers carry with respect to meeting solvency requirements, profitability, liquidity, expense, investment return, asset-liability mismatch, insurer’s future position, other risks-specific to the business etc.

(ii) This report shall specifically address:

a. The sensitivity of the future solvency position to potential changes in the economic environment, claims experience, pricing strategy and other relevant factors, if any

b. Building of early warning signals to assess the financial condition

c. Comprehensive view on the insurer

2. Lines of Business

(i) It is recommended that the Actuary of general reinsurance business must necessarily analyze and comment on the each of the LOBs stated under clause 2(2)(ii)(a) of Part IV(A) of Schedule I of IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024. (Under the following sections, list of LOBs is referred as LOB table).

(ii) In addition, the Actuary must analyze and comment on any treaty that is material from the perspective of financial condition of the FRB. For the sake of uniformity amongst FRBs, a material line of business may be defined as under:

(a) Motor Third party, whether written as part of a Motor package policy or Motor Act Only policy, regardless of the size, and

(b) Any treaty which meets any one of the following criteria: (in terms of general reinsurance business)

(6) It contributed to 5% or more of insurer’s total GWP during the reporting period,

(7) It contributes to 5% or more of insurer’s NWP,

(8) It contributes to 5% or more of insurer’s Gross Incurred Claims,

(9) It contributes to 5% or more of insurer’s Net Incurred Claims. AND

(10) Any other product or line of business which the Actuary believes is material to the financial condition of the insurer.

(iii) The Actuary may produce any other data or table that he/she believes aids in the analysis and (or) presentation of financial condition of the insurer.

3. Instructions:

(i) The Actuary shall ensure the following:

(b) The numbers provided in the FCR shall be:

(1) Reconciled with the financial statements of accounts and IBNR Report, wherever applicable.

(2) Provided in unit of thousands

(3) All outgo entries in the Annexure of FCR shall be shown in brackets ( )

(ii) The sequential order in the LOB table shall be strictly followed.

(iii) The Actuary shall provide detailed analysis along with the actions proposed, if any, on each section of the FCR.

Section 1: Executive summary

1.4 The executive summary shall summarize the report in a way so that the recipient of the report becomes acquainted with the large body of material to follow without having to go through it in detail.

1.5 The essence of the whole report needs to be succinctly captured in this section.

1.6 The Actuary shall explain the adequacy of reserving (i.e. IBNR Claims, Outstanding Claims Reserve, Unearned Premium Reserve, Premium Deficiency Reserve, etc.).

Section 2: Financial Analysis & Future Projection

2.4 The Actuary is expected to provide an enterprise level analysis of the current financial position and is expected to give a quick snapshot and set the context for the subsequent sections of the report

2.5 The following aspects are expected to be covered

(a) Performance in the financial year

(b) Financial analysis and comparison with what was budgeted – Income statement, Balance sheet and key ratios to be analyzed and actual versus expected analysis to be performed

(d) Future projections (based on Management inputs)

(e) Industry comparison – Key parameters to be benchmarked with industry information available as on date of preparation of report

(f) Major events that had taken place during the year relevant to the operations of the insurer or the parent companies (e.g. mergers, acquisitions, a new business activity, significant financial loss, changes in the company structure, etc.)

(g) Financial highlights from the latest published financial statements of the parent companies (assets, liabilities, profits for the year, etc.)

2.6 Format for the representation of insurer’s financials is given in Part B.

Section 3: Enterprise Business Analysis

In this section the Actuary shall provide analysis on a more granular level including LOBs, Geography, Channel Type of Policy (Retail/Commercial) or in any other manner deemed appropriate by the Actuary so that the key issues are highlighted.

Analysis could pertain to:

6.1 Profitability – trends in ICR, COR, Expense ratio, Commission ratio etc. Comments if any on the expense allocation methodology may also be made in this section.

6.2 Reserve adequacy – Development of Ultimate Loss for an accident year over the next few years needs to be provided based on the data in the required format. Significant deviations (positive or negative) need to be explained.

6.3 Retrocession structure including retention ratio: Comments on retrocession arrangement for the next year (based on the proposed retrocession policy) need to be made. The Actuary’s views on changes in the proposed policy compared to previous year needs to be highlighted. A three-year analysis of retroceded business is needed.

6.4 Disputes: The Actuary’s comments on disputed claims and steps to be taken needs to be emphasized

6.5 Sufficiency and quality of data: The Actuary’s comments on the sufficiency and quality of the data used in the calculation of IBNR and other reserves (including IBNER and PDR) where actuarial advice is sought by the Authority.

6.6 Data deficiency reserve: If the Actuary feels that there is a need to setup data deficiency reserve, comments about the same can be made in this section.

6.7 Consistency: The Actuary’s comments on consistency between pricing policy, underwriting policy and reserving policy of the insurer.

6.8 Appropriateness of methodologies: The Actuary’s comments on the appropriateness of the methodologies and underlying models used, as well as the assumptions made in the calculation of IBNR and other reserves (including IBNER and PDR).

6.9 Reliability and adequacy of calculation of IBNR: The Actuary’s comments on the reliability and adequacy of the calculation of IBNR and other reserves (including IBNER and PDR) where actuarial advice is sought by the Authority.

Section 4: Analysis of material lines of business (LOB)

4.3 A material line maybe defined as a LOB which is 5% of GWP, 5% of NWP, 5% of NIC of the reporting year or any other LOB which the Actuary considers to be critical to the FRB from an FCR point of view. The Actuary’s comments on the foreign operations of the FRB, if material, should also be included in this section based on the information available to him/her.

4.4 The following points may be included in the analysis pertaining to this section for each material LOB for at least three years: (both past and future as applicable)

(a) Growth over the years

(b) Future projection

(d) Loss ratio trends

(e) Premium adequacy

(f) Retrocession policy

(g) Reserving adequacy

(h) Commentary on Expense Allocations and their appropriateness

(i) Profitability

(j) Renewal analysis

(k) Impact of the LOB on to the financial condition of the FRB

The tables to be prepared is given in Part B

Section 5 Current & Future Solvency and Estimation of Economic Capital

5.1 This is a critical chapter wherein the Actuary is expected to discuss about the current and future solvency position of the FRB.

5.2 The Actuary is expected to perform stress/scenario testing (which he/she deems appropriate from the FRB’s point of view) to analyze the possible movement of solvency ratio at various levels of confidence.

5.3 The scenario/stress testing is expected to be performed on the business projections given earlier.

5.4 If the Authority prescribes any specific stress/scenario test to be done for all the players in the industry then that also needs to be included in this section.

5.5 Actuary shall estimate the Economic Capital and submit the related disclosures as specified by the Competent Authority.

Format to represent the results from scenario / stress testing is given in Part B.

Scenarios are to be explicitly mentioned by the Actuary

Section 6: Risk Management

7.7 In this section, the Actuary shall focus on identification of potential risks faced by the insurer both on a gross and net basis in a comprehensive manner along with mitigation and impact on the FRB.

7.8 Ideally, the overall characterization shall include the various key risk accumulations, be they by exposure lines or operational units, etc., per the Actuary’s discretion. In addition, shall characterize individually those accumulations that are material. For instance, Third Party exposure is a significant accumulation in its own merit for insurers that write Motor business.

The Actuary shall opine how the overall risk characteristics of the insurer compare with the stated risk appetite approved by the insurer’s board of directors.

7.9 The Actuary shall discuss the following point-wise

(a) The material lines of business written

(b) The material reserves arising from lines in run-off (if any)

(d) Risk Concentration. Region wise, product wise, line of business wise, distribution channel wise, any other factor deemed material by the Actuary, etc.

(e) Key trends or factors that have or may have a significant impact on the financial condition of the FRB

(f) The impact arising out of the FRB’s operational practices like discounts, response to market competition, reserving practices, catastrophes, business volume, etc.

7.10 Risk Characterization

The Actuary shall characterize the risk faced by the FRB with the help of:

(c) Accumulation of risk exposures under different categories that pose a material threat to the FRB’s financial condition. To the extent possible, the risk categories should be mutually exclusive and jointly exhaustive but the over-riding factor is to include all groupings that can lead to a large scale impact on the FRB. The Actuary shall define the materiality of the groupings — potential financial impact as a percent of net worth. Operational risk and Investment Risk shall be modeled independently from the underwriting exposure categories to the extent that their impact is not included in the underwriting groupings.

(d) It is desirable that the Actuary augments his analysis by constructing a “variance co-variance” matrix and provide the basic statistical measures. Minimally, given the tail length of certain key category risks a multivariate log normal distribution can be modeled on the data.

7.11 Risk management and mitigation

(a) The Actuary shall evaluate the capacity of the FRB to handle the underlying risk.

(b) An overview of the risk management functions with special focus on the chain of command employed in accepting and managing risks.

(d) The risk return trade-off guiding the FRB’s underwriting and investing operations including the overarching characteristics of the implemented protection structure including retrocession contracts.

(e) Risk monitoring procedures, review process and feedback loop.

(f) Contingency plans for emerging risks and the development of latent claims (if any).

(g) Development of necessary structural changes in pricing and reserving methodologies as a function of the risk performance of the FRB.

7.12 Sensitivity

(g) Scenario 1: Fall of market value of equity investments by 20% compared to the base scenario.

(h) Scenario 2: Increase in market value of equity investments by 20% compared to the base scenario.

(i) Scenario 3: Fall in interest rate on debt investments by 100bps compared to the base scenario.

(j) Scenario 4: Rise in interest rate on debt investments by 100bps compared to the base scenario.

(k) Scenario 5: Decrease of Ultimate Loss Ratio by 20% (multiplicative) compared to the base scenario.

(l) Scenario 6: Increase of Ultimate Loss Ratio by 20% (multiplicative) compared to the base

The Actuary shall define explicitly the base & the pessimistic scenarios assumed in arriving at the projections and discuss point-wise the following:

(a) The sensitivity of the business to the key risk exposures.

(b) The methods and assumptions used to assess the sensitivities.

Section 7: Retrocession

In this chapter the Actuary shall discuss the following

8.6 Retrocession program of the FRB in the past year and its adequacy.

8.7 Retrocession program for the forthcoming year.

8.8 Changes with respect to previous year’s program to be highlighted.

8.9 The Actuary may also include a table along with details and analysis of treaties.

8.10 The Actuary’s recommendations.

Section 8: Comments of the Executive Committee of FRB and Actions taken Report

The insurer shall provide the following under this chapter:

9.5 The date and place of meeting where the report was presented

9.6 Whether formally presented or tabled or sent by circulation

9.7 Comments of the Executive Committee and proposed course of action, if any on the any part of the FCR or issues raised by the Actuary

9.8 If the presentation happens after the submission deadline then the board comments may be sent separately to the Authority

Section 9(a): Certification by Certifying Actuary & CEO

The Actuary Certification:

“I, (name of The Actuary), the Actuary of (name of FRB), hereby certify,

(g) that I have complied with the provisions of the Insurance Act, 1938, Regulations, Rules and Directions of the IRDA;

(h) that I have taken into account all contingencies appropriate to the business that is valued and that the assumptions employed in the valuation are appropriate;

(i) that the reserves for technical liabilities mathematical reserves have been based on accurate data and have been calculated and reported accurately, subject to the following qualifications (list the qualifications, if any);

(j) that I have calculated the Required Solvency Margin accurately; and

(k) that the mathematical reserves for technical liabilities along with the Required Solvency Margin make good and sufficient provision for all the unmatured obligations under the terms of the policies on the books of the insurer.

(l) that this Financial Condition Report depicts the true underlying financial position of the insurer as on the Financial Year ending dd/mm/yyyy

Name of FRB:

Name of The Actuary:

Signature of The Actuary:

CEO Certification:

Name of FRB:

Name of the CEO:

Signature of the CEO:

Place:

Date:

Company Seal

GLOSSARY

1. Average Gross premium: Gross premium I number of exposures

2. Average net premium: Net premium / Number of exposures

3. Average Sum insured: Total sum insured / Number of exposures

4. Allocated loss adjustment expenses: correspond to those costs that the insurer is able to assign to a particular claim.

5. Combined ratio: Net commission ratio + expense ratio + Net incurred claim ratio

6.Claim Frequency: Number of incurred claims / Number of exposures

7. Claim Severity: Gross (net) Incurred claim amount / Number of Incurred claims

8. Closed claim without claim payment (number): Includes all the claims that are closed without claim payment.

9. Closed claim without claim payment (amount) : (For the purpose of this report) includes claim amount of all the claims closed without claim payment exclusive of allocated loss adjusted expenses and these expenses should be included in the claims closed with payment (amount).

10. Closed claim with claim payment (number): Includes all the claims that are closed with claim payment.