1. December 29, 2010 Satyan Jambunathan Prudential requirements A Life industry perspective

2. The supervisory authority requires insurers to recognise the range of risks that they face and to assess and manage them effectively ICP 18 Risk assessment and management 2

3. 3 Defining distributions and shocks Measurement of diversification benefits Lack of data to define Op risk distributions Defining distributions and shocks Measurement of diversification benefits Lack of data to define Op risk distributions Challenges Recognition of individual risks Introduction of corporate governance guidelines Board and group level oversight Move to computing risk based capital Varying levels of progress in industry Recognition of individual risks Introduction of corporate governance guidelines Board and group level oversight Move to computing risk based capital Varying levels of progress in industry Current Need for industry to Implement enterprise risk management Formally articulate risk appetite Implement robust measurement and review mechanisms Use risk based regulatory capital to drive adoption Need for industry to Implement enterprise risk management Formally articulate risk appetite Implement robust measurement and review mechanisms Use risk based regulatory capital to drive adoption Desired ICP 18 Risk assessment and management

4. Since insurance is a risk taking activity, the supervisory authority requires insurers to evaluate and manage the risks that they underwrite, in particular through reinsurance, and to have the tools to establish an adequate level of premiums ICP 19 Insurance activity 4

5. 5 None Challenges Product approval process of IRDA Reinsurance review process of IRDA Ongoing submissions to IRDA Product approval process of IRDA Reinsurance review process of IRDA Ongoing submissions to IRDA Current As above Desired ICP 19 Insurance activity

6. The supervisory authority requires insurers to comply with standards for establishing adequate technical provisions and other liabilities, and making allowance for reinsurance recoverables. The supervisory authority has both the authority and the ability to assess the adequacy of the technical provisions and to require that these provisions be increased, if necessary ICP 20 Liabilities 6

7. 7 None Challenges Regulations on valuation of liabilities Annual review of the ARA and AA report Professional guidance Requirement for resilience testing Peer review Regulations on valuation of liabilities Annual review of the ARA and AA report Professional guidance Requirement for resilience testing Peer review Current As above Audit of valuation of liabilities As above Audit of valuation of liabilities Desired ICP 20 Liabilities

8. The supervisory authority requires insurers to comply with standards on investment activities. These standards include requirements on investment policy, asset mix, valuation, diversification, asset- liability matching, and risk management ICP 21 Investments 8

9. 9 None Challenges Regulations on Asset class limits Exposure limits Process including segregation of duties Valuation of assets Audit and review mechanisms ALM in varying stages of development Regulations on Asset class limits Exposure limits Process including segregation of duties Valuation of assets Audit and review mechanisms ALM in varying stages of development Current As above Desired ICP 21 Investments

10. The supervisory authority requires insurers to comply with standards on the use of derivatives and similar commitments. These standards address restrictions in their use and disclosure requirements, as well as internal controls and monitoring of the related positions ICP 22 Derivatives and similar commitments 10

11. The supervisory authority requires insurers to comply with the prescribed solvency regime. This regime includes capital adequacy requirements and requires suitable forms of capital that enable the insurer to absorb significant unforeseen losses ICP 23 Capital adequacy and solvency 11

12. 12 Need for professional guidance on risk based capital Calibrations of stresses appropriate to Indian conditions Need for professional guidance on risk based capital Calibrations of stresses appropriate to Indian conditions Challenges Factor based approach Some allowance for risk in product lines Limited forms of capital Scenario testing on projections - FCR Adequately prudent levels of capital requirement Factor based approach Some allowance for risk in product lines Limited forms of capital Scenario testing on projections - FCR Adequately prudent levels of capital requirement Current As above Greater allowance for risks specific to entities As above Greater allowance for risks specific to entities Desired ICP 23 Capital adequacy and solvency

13. Thank you 13