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Procedure for Appointment of an Appointed Actuary: IRDAI Notification

Procedure for Appointment of an Appointed Actuary: IRDAI Notification

The IRDAI issued a notification dated 5th December 2022 regarding the appointment of an appointed actuary with special emphasis on the eligibility, and procedure for such appointment, along with the powers, rights and duties of the appointed actuary as well as the insurer. All the aspects are discussed in detail in the present article.

Procedure for Appointment of an Appointed Actuary

The detailed procedure for the appointment of an appointed actuary is provided below-

It shall be appointed by an insurer registered to carry on insurance business in India subject to Regulation 3(B), and Regulation would be called an appointed actuary.

Eligibility Criteria to be appointed as an Appointed Actuary for an Insurer

The person should fulfil the below-mentioned criteria for qualifying for the post.

  • The Person must be an ordinarily resident of India;
  • A Fellow member as per the Actuaries Act, 2006;
  • Institute of Actuaries of India’s member  (IAI), satisfying the following requirements in the case of a Life Insurer:
  • Minimum 12 years of experience in the area of Life Insurance and out of which a minimum of  7 years shall be the post-fellowship experience.
  • However, 2 yrs from the yrs as mentioned above of experience can be reduced in cases where the applicant has passed the Specialist Application or Advanced Specialist level subject in Life Insurance from the IAIA or from any other institute or body having  Mutual Recognition Agreement, the experience criteria including post-fellowship experience.
  • Minimum 3yrs of experience post fellowship experience out of 7 or 5 years, depending upon the applicability provided under Regulation 3B(iii)(a), would be in the review or product pricing or preparation of annual statutory valuation of an Indian Life Insurer.
  • Despite the above-mentioned experience, a person having experience in the area of Life Insurance as an Independent or Panel Actuary, Peer Reviewer, Actuary certifying the reinsurance returns for the Life reinsurance business or experience in actuarial consultancy in the Life Insurance business or sufficient experience with the Authority would also be considered.
  • In the case of a General Insurer, a  member of the (IAI), fulfilling the below-mentioned requirements –
  • Minimum 9 years experience in the subject of General Insurance and out of which minimum of 4 years shall be post-fellowship experience.
  • If the applicant has qualified the Specialist Application or Advanced Specialist level subject in such Insurance from IAI or from any other institute or body having Mutual Recognition Agreement with IAI, the experience criteria, including post-fellowship experience the 9 yrs experience, shall be reduced by 2 yrs.
  • Minimum 2 years post-fellowship experience out of 4 yrs or 2 years as applicable, as specified under the above-mentioned regulation, shall be in preparing or reviewing the annual statutory valuation or product pricing of an Indian General Insurer.
  • Notwithstanding the above, experience in the subject of General Insurance as a Peer Reviewer or Panel Actuary or Actuary certifying reinsurance returns for the General reinsurance business or experience in actuarial consultancy in the General Insurance business or relevant experience with the Authority shall also be considered.
  • Minimum 3yrs experience in the role of middle or senior-level management.
  • In the case of a Health Insurer: the Institute of Actuaries of Indias (IAI) must satisfy the same conditions and experience level as of General Insurance mentioned along with such experience in Health Insurance as well.
  • A full-time basis employee of the insurer.
  • A person devoid of any professional or other misconduct;    
  • Isn’t an AA of any other insurer in India;
  • A person possessing 
  • a COP issued by the Institute of Actuaries of India;
  • Not over the age of 70 years.
  • It must be noted that the existing Appointed Actuaries, as of the date of notification of these Regulations, shall be eligible to continue as Appointed Actuaries of the respective insurer.
  • An insurer needs to submit an application in the prescribed format for seeking the approval of the Authority for the appointment of an Appointed Actuary, which shall either be accepted or rejected by the authority within thirty days.
  • In case the application is rejected by the authority, it shall not be done without providing the insurer with an opportunity to be heard.
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In case of the inability of the insurer to appoint the same as per Regulation 3 (B), an application is required to be made by the insurer seeking the relaxation of any of the eligibility criteria. The Authority may provide the relaxation of the eligibility criteria except the conditions provided in Regulation 3(B)(ii), 3(B)(vii) & 3(B)(ix).

The appointment of an AA would effectuate on or subsequent to the date of approval by the Authority.

Effect of Rejection of the Application

In case the application of the insurer is rejected by the Authority, another application can be filed by the insurer for appointing any other actuary other than the one rejected by the authority.

Carrying on Business without an Appointed Actuary

The insurer is not allowed to carry out the insurance or reinsurance business without an Appointed Actuary. Any non-compliance in respect of the same would attract appropriate actions as per the relevant provisions of the Insurance Act of 1938

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Upon the request of the insurer, the authority may grant the relaxation for a time period as deemed fit by the authority, but the same shall not exceed a period of more than 1 yr.

Circular(s) in respect of the transitory provisions for consideration of relaxation provided under Regulation 5(b) above shall be issued by the Chairperson from time to time.

 Cessation of Appointment of Appointed Actuary

  • The notice of withdrawal of the approval can be served to the Appointed Actuary on the following grounds.
    • Cessation of their eligibility  as per the Regulation 3(B)
    • Failure in respect of performing its duties and obligations under his Regulations.
  • The Appointed Actuary shall be provided with a chance of being heard by the Authority after being served with the above-mentioned notice, after which the Authority shall issue appropriate order either withdrawing approval or revocation the notice so issued. 
  • If anyone ceases to be an Appointed Actuary of an insurer except the grounds provided in Regulation 6(A), the insurer & Appointed Actuary shall inform the Authority of the reasons for the same within one week of such cessation.
  • The insurer, in consultation with the Appointed Actuary, shall work towards avoiding delay in the submission of annual statutory returns arising from the cessation of services of the Appointed Actuary.

Powers of Appointed Actuary

An appointed actuary has the following powers –

  • Access to all such information and documents that are in the possession or under control of the insurer only if such access is essential for the proper and effective performance of his functions and duties and also seek any information in respect of Regulation 7(A) of from any officer or employee of the insurer.

It shall have the following entitlement.

  • Attending, speaking and discussing any matter in meetings of the management, including directors meetings of the insurer & in  meetings of the shareholders or the policyholders of the insurer relating to the actuarial advice given to the directors; or something that can affect the solvency of the insurer; that can, in turn, affect the ability of the insurer in meeting the reasonable expectations of policyholders; or
  • On the subject where actuarial advice is necessary.
  • Make any statement to the insurer regarding the performance of their functions as an Appointed Actuary.
  • It is an addition to any other privilege provided to such a person under any other Regulations.
  • A provision of the letter of appointment of the Appointed Actuary cannot prevent or restrict their duties, obligations and privileges under these Regulations.
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Duties and Obligations of the Appointed Actuary

An Appointed Actuary of an insurer has the following duties and obligations. 

  • Ensure that all the requirements are available to him for conducting the actuarial valuation of liabilities and assets of the insurer;
  • Render the actuarial advice to the management of the insurer on the subject of product design and pricing, insurance contract wording, investments and reinsurance, particularly.
  • Identify and monitor the risks regarding the ability of the insurer towards maintaining solvency at all times.
  • Report those risks to the Board of the insurer where the Appointed Actuary is of the opinion that there exist material concerns that has a possibility of adversely affecting the solvency of the insurer with recommendations on actions for rectifying of solvency position and informing the Authority in the event of failure of the insurer take necessary steps to rectify the situation;
  • Comply with the provisions of section 64V and VA of the Act in respect of certification of the assets and liabilities valued in the manner required under the said section; and maintaining the required control level of solvency margin in the manner required under the said section, respectively.
  • Notify the management of the insurer regarding any matter which, in his opinion, may require the action of the insurer to avoid any contravention of the Act that may affect the interests of the policyholders;
  • Comply with the Authority’s directions from time to time;
  • Ensure that the overall pricing policy of the insurer is in tune with the overall underwriting and claims management policy of the insurer;
  • Ensure adequacy of reinsurance arrangements;
  • Contribute towards the effective implementation of the risk management system;
  • Comply with the provisions of sec- 21 of the Act regarding further information required by the Authority;
  • Stop acting as per this role upon being disqualified.
  • Respect the generally accepted actuarial principles and practices; perform his or her duties and obligations.
  • Intimate the Authority of any disciplinary proceedings initiated against them by any entity within 7 days from the date of such initiation.
  • Inform the following Authority through a written opinion within a reasonable time.
  • Any contravention with respect to the Act or any other acts committed by the insurer of such a nature that is likely to affect the interests of either the Policyholders or beneficiaries of policies granted by the insurer; in a significant manner.
  • If there has been a failure on the part of the directors  in taking such action as is reasonably necessary for enabling them to exercise their duties and obligations under these Regulations; or
  • If an officer or employee of the insurer has engaged in conduct order to for preventing them from exercising his or her duties and obligations under these Regulations.

Appointed Actuary of an insurer’s Duties being engaged in Life Insurance Business

The duties are enlisted below –

  • Certification of the actuarial report and abstract and other returns as required u/s 13 of the Act;
  • Complying with the provisions of section 112 of the Act in regard to the recommendation of interim bonuses or bonuses payable by life insurers to policyholders whose policies mature for payment due to death or otherwise during the period of inter-valuation.
  • Providing actuarial advice regarding the management expenses pertaining to the insurer;
  • Making sure that the premium rates of the insurance products are fair;
  • Certifying that the mathematical reserves are ascertained  as per the prescribed manner  in the extant provisions of the IRDAI (Assets, Liabilities and Solvency Margin of Life Insurance Business) Regulations, 2016 and considering the Actuarial Practice standard  / Guidance Notes prescribed  by the  IAI and any directions given by the Authority;
  • Making sure the consideration of the policyholders’ reasonable expectations in matters of valuation of liabilities and distributing the surplus to the participating policyholders who are entitled to a share of surplus;
  • Submitting actuarial advice in the interests of the insurance industry and the policyholders;
  • Coordinating the calculation of mathematical reserves;
  • Ensure that the appropriateness of the methodologies and the models used, as well as the assumptions made in the calculation of mathematical reserves;
  • Checking the sufficiency and quality of the data used for mathematical reserves; k. Informing the Board of insurers about the reliability and adequacy of mathematical reserves;
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Appointed Actuary of the Insurer’s Duties Engaged In General or Health Insurance Business

  • Ensuring fair premium rates of the insurance products 
  • Certification of the claims reserves, including (IBNR) and (IBNER), (PDR)), are abiding by the actuarial principles as per the manner prescribed in the provisions of IRDAI (Assets, Liabilities and Solvency Margin of General Insurance Business) Regulations, 2016;
  • Rendering actuarial advice regarding the management of the insurer’s expenses.
  • Managing the calculation of reserves for IBNR and other reserves, inclusive of reserves for PDR and IBNER 
  • Checking the  accuracy  and quality of the data used for calculating reserves for IBNR and other reserves, including reserves for IBNER and PDR;
  • Informing the Board of insurers about the  adequacy and reliability of reserves for IBNR and other reserves, including reserves for IBNER and PDR;

Conflict of Interest

  • It does not function in any other capacity except what is provided in these regulations, as the same can result in a conflict of interest in performing its role as provided in these regulations.
  • The insurer and the Appointed Actuary are obligated to always comply with Regulation 9(a) during his or her tenure in that role.

Obligations of the Insurer

The insurer has the following obligations.

  • Providing adequate resources to the Appointed Actuary;
  • For the purpose of developing sufficient actuarial expertise, life insurers must have a minimum of two actuaries, and General/Standalone Health insurers shall have a minimum of one actuary in addition to the Appointed one for pricing and valuation purposes within the period as  prescribed by the Authority from time to time;
  • Ensuring that various functions of the insurer provide sufficient  support to the Appointed Actuary in discharging his or her duties and obligations;
  • Ensuring that the Appointed Actuary doesn’t perform the role of the insurer’s  Chief Risk Officer simultaneously according to the extant provisions of Corporate Governance Guidelines issued by the Authority.
  • However, the Chief Risk Officer may preferably be independent of the Appointed Actuary.
  • Making sure that the Appointed Actuary reports to the CEO of the insurer directly.

Applicability to Reinsurance Business

These Regulations shall be applicable to reinsurers carrying on reinsurance business in India except in the case of a foreign insurer engaged in the business of re-insurance through a branch established in India.

Power of the Authority to issue Clarifications.

The Chairperson shall issue appropriate clarifications or guidelines as deemed necessary for removing any difficulties or doubts arising in the application or interpretation of any of the provisions under these Regulations.

Conclusion

The IRDAI’s notification covers all the aspects related to the appointment procedure of an Appointed Actuary in a well-defined manner, which can help to avoid any confusion that may arise in respect of the same, together with facilitating such appointment without any complexities.

IRDAIAppointed-Actuary-Regulations-2022

Read Our Article: Procedure for Registration of Indian Insurance Companies under IRDAI Regulations

References

  1. https://www.indiacode.nic.in/handle/123456789/2304?sam_handle=123456789/1362

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