The Insurance Regulatory and Development Authority of India (IRDAI) has notified the Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) (Second Amendment) Regulations, 2026, effective from the date of publication in the Official Gazette. The amendments are stated to further the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 by amending the principal regulations of 2024. The notification revises provisions relating to the powers to issue circulars, actuarial terminology, appointment, eligibility, powers and functions of Appointed Actuaries, Certifying Actuaries and Actuaries for Specific Purposes, including separate requirements for Foreign Reinsurer’s Branches and Indian reinsurers. It also amends reporting requirements by substituting “Actuary Report” for “Actuarial Report and Abstract”, introduces revised reporting formats, Financial Condition Reports, valuation surplus reporting, certification and signing requirements, timelines for submission, and new reporting annexures. Further amendments revise investment provisions, references to statutory provisions, investment limits and conditions, inspection and supply of returns, and introduce changes relating to investments in infrastructure SPVs, private limited companies, repo, reverse repo and Government Securities Lending transactions.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
NOTIFICATION
Hyderabad, the 30th July, 2026
Insurance Regulatory and Development Authority of India (Actuarial, Finance and Investment Functions of Insurers) (Second Amendment) Regulations, 2026
F. No. IRDAI/Reg/ 6/220/2026.—In exercise of the powers conferred by clauses (f), (g), (gc), (h), (i), (ia), (ib), (y), (z), (za), (zab) and (zd) of sub-section (2) of section 114A, sections 11, 12A, 13,15, 20, 27, 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 furtherance to the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025.
3. In 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, including but not limited to, ‘with profits committee’, applicable norms in respect of appointment of Actuary(ies), Foreign Reinsurer’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 Reinsurer’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 Reinsurer’s Branch under section 12A of the Act as per the criteria specified under these Regulations;
(6) “Actuary for Specific Purposes” means an Actuary other than the Appointed Actuary and the Certifying Actuary, appointed by the insurer under section 12A of the Act for the purposes of sections 3B or 22 or 64K 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 “Appointment of 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 of 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 of 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 Reinsurer’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 notify the Competent Authority of the appointment within seven days of such appointment.
(3) A person shall be eligible to be appointed as Certifying Actuary if he or she satisfies 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 returns and 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 returns, Reports and Statements as prescribed in these Regulations.
(4) Powers of Certifying Actuary
(xi) 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.
(xii) 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.
(xiii) The Certifying Actuary shall be entitled to make any statement(s) to the FRB on matters:
(a) that relate to the actuarial advice given to the directors and (or) Executive Committee of Management;
(b) that may affect the solvency of the FRB;
(c) on which actuarial advice is necessary.
(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 directions passed by the Authority regarding submission of information under section 21 of the Act;
(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 returns, 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:
(d) 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;
(e) Coordinating the calculation of mathematical reserves;
(f) Ensuring the appropriateness of the methodologies and underlying models used, as well as the assumptions made in the calculation of mathematical reserves;
(g) Assessing the sufficiency and quality of the data used in the calculation of mathematical reserves;
(h) 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:
(i) 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;
(j) Coordinating the calculation of reserves for IBNR and other reserves (including reserves for IBNER and PDR);
(k) 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;
(l) 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 for Specific Purposes shall carryout his or her responsibilities in individual capacity.
(3) The Insurer and the Actuary for Specific Purposes 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 for Specific Purposes: 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 for Specific Purposes 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.
(6) 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.
(7) The Competent Authority may, on request of the insurer, grant relaxation for one or more prescribed eligibility conditions.
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.
(1) 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:
(c) that he or she ceases to be eligible in accordance with clause 11(1) of Part II of Schedule – I of these regulations, or
(d) 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 clause 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)
(4A) 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 the valuation balance sheet as per the format provided as 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 applicable to all the general insure rs andstandalone health insurers 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.
(viii) Financial Condition Report in the format as specified in Annexure Actl-15
(ix)IBNR Claims 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 Report as specified under clause 1(i) 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:
e. Before clause 1, the following shall be inserted namely:
(A) Assets, Liabilities and Solvency Margin:
f. 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:
(iii) Valuation Balance Sheet- Form IRDAI-RI-I (Annexure Actl-17A)
(iv) 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:
(v) 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.
(vi) Actuary Report for General reinsurance business in the format of Financial Condition Report as specified in Annexure Actl-15 along with IBNR Claims Reserve Report in format as specified in Annexure Actl-16.
(vii) The Actuary Report as specified under clause 1(1)(i) and Annexure Actl-15 as specified under clause 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 Reinsurer’s Branches
(viii) 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.
(ix) Actuary Report for General reinsurance business in the format of Financial Condition Report as specified in Annexure Actl-15A and IBNR Claims Reserve Report in format as specified in Annexure Actl-16.
(iii) The Actuary Report as specified under clause 1(2)(i) and Annexure Actl-15A as specified under 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.
2. 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
11. Throughout the principal Regulations, for the words and figures “Section 27A(2)”, the words ““Proviso to Section 27(1)”” shall be substituted.
12. 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.
13. In clause 4 of Part II of the Schedule III of principal Regulations the figures and letter “27A” shall be omitted.
14. In clause 5 of Part II of the Schedule III of principal Regulations the figures and letter “27A” shall be omitted.
15. In clause 6 of Part II of the Schedule III of principal Regulations the figures and letter “27A” shall be omitted.
16. In clause 7 of Part II of the Schedule III of principal Regulations the figures and letter “27B” shall be omitted.
17. In clause 8 of Part II of the Schedule III of principal Regulations the figures and letters “27A”, “27B” and “27C” shall be omitted.
18. 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 Special Purpose Vehicle incorporated as company limited by shares and 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;
i. The debt/loan is treated as standard in the books of the lender;
ii. The debt issued shall have minimum credit rating of AA;
iii. The SPV shall disclose on quarterly basis, the cash flows generated from the project to the insurer;
iv. 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.
19. 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 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.
20. 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 3% of the Life Fund or Segregated Fund in case of life insurer and 5% of Investment assets in case of general insurer in equity or debt instruments of private limited companies, Alternative Investment Funds (AIFs) and Venture Funds (VFs) all taken together. These investments are permitted as a part of ‘Other Investments’. The investment in private limited companies will be 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 25% 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.
Note XVII: Counterparty Credit exposure in respect of Reverse Repo, Repo and Government Securities Lending has to be monitored as per the Board Approved Policy.
21. 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.
22. 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
23. 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:
(e) seeking inspection of any return or a copy of any return under Section 20 (1) of the Act; or
(f) 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 these Regulations and clause 1(1)(ii) of Part
V(B) of Schedule – I of these Regulations)
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 of this Annexure:
Part A
1. The Objectives:
(i) The objective of Financial Condition Report (“FCR”) is to investigate the financial condition of the 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 also cover:
(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
(c) Comprehensive view on the financial condition of the insurer
2. General Instructions:
(i) The Appointed Actuary shall analyze and comment on the each of the Line of Business (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, the Appointed Actuary shall analyze and comment on any product that is material from the perspective of financial condition of the insurer.
(iii) A product shall be considered material if it meets any of the following criteria:
(d) It contributed to 5% or more of insurer’s total Gross Written Premium(GWP) during the reporting period,
(e) It contributes to 5% or more of insurer’s Net Written Premium (NWP),
(f) It contributes to 5% or more of insurer’s Gross Incurred Claims,
(g) It contributes to 5% or more of insurer’s Net Incurred Claims. and
(h) Any other product or line of business which Actuary believes is material to the financial condition of the insurer.
(iv) The Appointed Actuary may produce any other data or table that he or she believes aids in the analysis and (or) presentation of financial condition of the insurer.
(v) The Appointed 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 Claims Reserve Report, wherever applicable
(2) in units of thousands
(3) with outgo entries shown in brackets ( )
(vi) The sequential order in the LOB table shall be strictly followed.
(x) The Appointed 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 be prepared keeping in view that the audience of the report is Board of the insurer and the Regulator. The essence of the whole report shall be succinctly captured in this section summarizing the financial condition of the insurer.
1.2 The Appointed Actuary shall also include specific comments on the adequacy of reserving (i.e.
IBNR Claims Reserve, Outstanding Claims Reserve, Unearned Premium Reserve, Premium Deficiency Reserve, etc.).
Section 2: Financial Analysis & Future Projection
2.1 An enterprise level analysis of the current financial position and the context for the subsequent sections of the report shall be presented.
2.2 The following aspects are shall 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
(c) Future projections (based on Management inputs)
(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 insurer’s 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 tables to be appended with the report shall be as per Part B of this Annexure. Section 3: Enterprise Business Analysis
Granular level analysis of LOBs, Geography, Distribution Channel, Retail or Commercial lines of business or in any other manner deemed appropriate by Actuary shall be provided highlighting the key issues.
Analysis shall pertain to:
3.1 Profitability including an analysis on trends in Net Incurred Loss Ratio, Expense ratio, Commission ratio, Combined Ratio etc.
3.2 Expense allocation methodology highlighting the changes in methodology compared to previous year.
3.3 Reserve adequacy – Development of Ultimate Loss for an accident year over the next few years
shall be provided based on the data in the required format. Significant deviations (positive or negative) shall be explained.
3.4 Reinsurance structure including retention ratio. Comments on reinsurance arrangement for the next year (based on the proposed reinsurance program). The Appointed Actuary’s views on changes in
the proposed policy compared to previous year along with three-year analysis of ceded business.
3.5 Grievances – The Appointed Actuary’s comments on data on customer grievances and steps to be taken from a policyholder protection point of view.
3.6 Sufficiency and quality of data: The Appointed Actuary’s comments on the sufficiency and quality of the data used in the calculation of IBNR claim reserves and other reserves (including IBNER claims and PDR).
3.7 Data deficiency reserve: The Appointed Actuary’s comments on data deficiencies observed and reserves provided for the deficiencies, if any.
3.8 Consistency: The Appointed Actuary’s comments on consistency between pricing policy, underwriting policy and reserving policy of the insurer.
3.9 Appropriateness of methodologies: The Appointed Actuary’s comments on the appropriateness of the methodologies and underlying models used, as well as the assumptions made in the calculation of reserves.
3.10 Reliability and adequacy of calculation of reserves: The Appointed Actuary’s comments on the reliability and adequacy of the calculation of IBNR claim reserves and other reserves.
Section 4: Analysis of material lines of business (LOB)
4.1 An LOB shall be considered material if it contributed to 5% of GWP or 5% of NWP or 5% of Net Incurred Claims(NIC) of the reporting year or any other LOB which the Appointed Actuary considers to be critical to the insurer from an FCR point of view. Motor Third party, whether written as part of a Motor package policy or Motor Act Only policy, regardless of the size shall be treated as a material LOB. Analysis of each of the material LOBs shall be provided. The Appointed Actuary’s comments on the foreign operations of the insurer, if material, should also be included in this section.
4.2 The following points shall be included in the analysis pertaining to this section for each material LOB:
(g) Growth over the years
(h) Future projection
(i) Business Mix
(j) Loss ratio trends
(k) Premium adequacy
(l) Reinsurance policy
(m) Reserving adequacy
(n) Commentary on Expense Allocations, its appropriateness, compliance to IRDAI (Expenses of Management, including Commission of Insurers) Regulations, 2024 as amended from time to time.
(o) Profitability
(p) Renewal analysis (for retail lines)
(q) Impact of the LOB on to the financial condition of the insurer
Format for the tables to be appended with the report shall be as per Part B of this Annexure.
Section 5: Investments and Asset Liability Management(ALM)
This section shall include The Appointed Actuary’s comments on the following:
5.1 Current investment portfolio and strategy being followed.
5.2 The Appointed 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 with the ALM as on 31st March on a run off basis.
5.4 Formats for ALM working shall be as per Part B of this Annexure.
Section 6: Current & Future Solvency
6.1 This is a critical chapter wherein the Appointed Actuary shall discuss the current and future solvency positions of the insurer.
6.2 The Appointed Actuary shall perform stress and scenario testing (which he or she deems appropriate from the insurer’s point of view) to analyze the possible movement of solvency ratio at various levels of confidence.
6.3 The scenario testing and stress testing are shall be performed on the business projections given earlier.
6.4 This section shall also include the common stress and scenario tests as prescribed by the Authority to all insurers under subsection 7.6 of this Annexure.
6.5 The Appointed Actuary shall estimate the Economic Capital and submit the related disclosures as specified by the Competent Authority.
6.6 Format to represent the results of stress and scenario tests shall be as per Part B of this Annexure. Stresses and Scenarios considered shall be explicitly mentioned in the report.
6.7 The Appointed Actuary shall define explicitly the base, the optimistic and the pessimistic scenarios assumed in arriving at the projections and provide point-wise discussion on the following:
(r) sensitivity of the business to the key risk exposures
(s) methods and assumptions used to assess the sensitivities
(t) sensitivity of the risks that have a significant impact on the solvency of the insurer.
Section 7: Risk Management
7.1 In this section, the Appointed Actuaryshall 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 insurer.
7.2 Ideally, the overall characterization shall include the various key risk accumulations, be they by exposure lines or operational units, etc., as per the Appointed Actuary’s opinion. 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 Appointed 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 Appointed Actuary shall discuss the following point-wise
(c) The material lines of business written
(d) The material reserves arising from lines in run-off (if any)
(e) Key Risks
(f) Risk Concentration: Region wise, product wise, line of business wise, distribution channel wise, any other factor deemed material by the Actuary, etc.
(g) Key trends or factors that have or may have a significant impact on the financial condition of the insurer
(h) The impact arising out of the insurer’s operational practices like discounts, response to market competition, reserving practices, catastrophes, business volume, etc.
7.4 Risk Characterization
The Appointed Actuary shall characterize the risk faced by the insurer with the help of:
(u) Accumulation of risk exposures under different categories that pose a material threat to the insurer’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 insurer. The Appointed 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 Third Party Administrator (TPA) operations could be included as part of the underwriting risk or separately as an operational risk.
(v) It is desirable that the Appointed Actuaryaugments his or her 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
The Appointed Actuary shall evaluate the capacity of the insurer to handle the underlying risk.
(w)An overview of the risk management functions with special focus on the chain of command employed in accepting and managing risks.
(x) Steps taken to understand the quantity of risk and risk appetite.
(y) The risk return trade-off guiding the insurer’s underwriting and investing operations including the overarching characteristics of the implemented protection structure including reinsurance contracts.
(z) Risk monitoring procedures, review process and feedback loop.
(aa) Contingency plans for emerging risks and the development of latent claims (if any).
(bb) Development of necessary structural changes in pricing and reserving methodologies as a function of the risk performance of the insurer.
7.6 Sensitivity (Refer to subsection 6.4 of this Annexure)
At the enterprise level, the Appointed Actuary shall perform sensitivity analysis based on the following parameters in addition to the insurer’s specific analyses as referred under Section 6 and present the result in the format provided in Part – B of this Annexure.
(cc) Scenario 1: Fall of market value of equity investments by 20% compared to the base scenario.
(dd) Scenario 2: Increase in market value of equity investments by 20% compared to the base scenario.
(ee) Scenario 3: Fall in interest rate on debt investments by 100bps compared to the base scenario.
(ff) Scenario 4: Rise in interest rate on debt investments by 100bps compared to the base scenario.
(gg) Scenario 5: Decrease of Ultimate Loss Ratio by 20% (multiplicative) compared to the base scenario.
(hh) Scenario 6: Increase of Ultimate Loss Ratio by 20% (multiplicative) compared to the base scenario.
Section 8: Reinsurance
In this chapter the Appointed Actuary shall discuss the following:
8.1 Reinsurance program of the insurer in the previous 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 The Appointed Actuary may also include a table along with details and analysis of treaties.
8.5 The Appointed Actuary’s recommendations.
Section 9: Comments of the Board of the Insurer and Action taken Report
The insurer shall provide the following:
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 the Actuary
9.4 If the presentation happens after the submission deadline then the Board’s comments may be sent separately to the Authority Section 10(a): Certifications Appointed Actuary Certification:
“I, (name of Actuary), the Appointed Actuary of (name of insurer), hereby certify,
(o) that I have complied with the provisions of the Insurance Act, 1938, Regulations, Rules, Circulars, Guidelines and Directions of the IRDAI;
(p) 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;
(q) 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);
(r) that I have calculated the Required Solvency Margin accurately; and
(s) 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.
(t) 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 the Appointed Actuary:
Signature of the Appointed Actuary:
CEO Certification:
I certify that full and accurate data has been furnished to the Appointed 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:
Insurer’s 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,
(u) that I have reviewed the submission made by the Appointed Actuary.
(v) that I concur with the aforesaid submission.
Name of Insurer:
Name of Mentor:
Signature of Mentor:
Place:
Date:
Counter signed by the Principal Officer:
Place:
Date:
Insurer’s Seal:
Below signatures are made pursuant to clause 3 of Part IV(B) of Schedule – I of IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 in respect of General insurers (or) clause 1(1)(iii) of Part V(B) of Schedule – I of IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 in respect of Indian reinsurers (Please strike off whichever is not applicable)
Director Director
Chairperson
GLOSSARY
The following terms as used for the purpose of this report shall have the meaning as specified below:
6. Average Gross premium: The ratio of Gross premium to Number of exposures
7. Average net premium: The ratio of Net premium to Number of exposures
8. Average Sum insured: the ratio of Total sum insured to Number of exposures
9. Allocated loss adjustment expenses: Correspond to those costs that the insurer is able to assign to a particular claim.
10. Combined ratio: Net commission ratio + expense ratio + Net incurred loss ratio
11. Claim Frequency: The ratio of Number of incurred claims to Number of exposures
12. Claim Severity: The ratio of Gross (net) Incurred claim amount to Number of Incurred claims
13. Closed claim without claim payment (number): Includes all the claims that are closed without claim payment.
14. Closed claim without claim payment (amount): 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).
15. Closed claim with claim payment (number): Includes all the claims that are closed with claim payment.
16. Closed claim with claim payment (amount): includes claim amount of all the claims closed with payment inclusive of allocated loss adjusted expenses of both claims closed with & without payment.
17. Expense Ratio: The ratio of Operating expenses to Gross written premium
18. Exposures: An exposure is the basic unit of risk that underlies the insurance premium
19. Earned Exposure Year: Exposure per unit of year of risk coverage.
20. Insurance profit: Underwriting profit + Investment income on insurance funds
21. Gross Earned Premium (GEP): Premium from direct business written + Premium on reinsurance accepted +/-Adjustment for change in reserve for unexpired risk
22. 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
23. Gross claims paid: Claim amount paid on direct business written + Claim amount paid on reinsurance accepted business
24. 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)
25. Gross Incurred Loss Ratio: The ratio of Gross incurred claim to Gross earned premium
26. Gross claims Paid Loss Ratio: The ratio of Gross claims paid to Gross earned premium
27. Gross commission: Commission paid on direct written business + Commission paid on reinsurance accepted business.
28. 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
29. Net premium: Premium from direct business written + Premium on reinsurance accepted – Premium on reinsurance ceded
30. Net claims paid: Claim amount paid on direct business written + Claim amount paid on reinsurance accepted business -Claim amount received from ceded business
31. Net Incurred claims or Net Incurred Loss: 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)
32. Net Commission: Commission paid with respect to direct business + Commission paid with respect to Reinsurance accepted – Commission received with respect to Reinsurance ceded
33. Net Incurred Claim Ratio or Net Incurred Loss Ratio: The ratio of Net Incurred claim to Net earned premium
34. Net claims paid loss ratio: The ratio of Net claims paid to Net earned premium
35. Net Commission ratio: The ratio of Net commission to Net Premium
36. Number of Incurred claims: Number of settled claims (i.e. claims are closed with / without payment) + open claims
37. Operating expenses: As per Schedule 4 of the Annual Report
38. Income from investments: As per Revenue account of the Annual Report
39. 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.
40. Retention ratio: The ratio of Net Written Premium to Gross Written Premium
41. Reporting Delay: It is time from when the event occurs through to the time that the insurer is notified of the event.
42. 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.
43. Settlement Delay: It is the time period between notification to the insurer and the payment of the claim.
44. Tail length: Estimated time taken for settlement of claim from the date of loss occurrence
45. Underwriting profit: Net earned premium – Net incurred claims+/-Net Commission-Operating Expenses-Premium Deficiency Reserve
46. 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.
47. Unearned Premium Reserve (UPR) is as defined in IRDAI (Actuarial, Finance and Investment Functions), Regulations 2024.
48. 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.
