Asset liability management and anti-fraud policies Within the risk management model, the asset liability management (ALM) framework will cover areas of significance in terms of their potential impact on economic value. The economic value of asset or liability cash flows is derived in such a way as to be consistent with current market prices where they are available, or by using market-consistent principles, methodologies or parameters. An insurer is required to develop and implement controls and reporting procedures for ALM policies that are appropriate for its business and the risks to which it is exposed. All insurers should provide ALM details on a quarterly basis. This includes results of stress testing on asset values as prescribed by IRDA and the bifurcation of asset and liabilities for each bucket of duration (Macaulay duration). In order to provide regulatory supervision and guidance on the adequacy of measures taken by insurers to address and manage risks emanating from fraud, the IRDA recently laid down guidelines requiring insurance companies to have a fraud monitoring framework in place. The guideline mandates that insurance companies have an anti-fraud policy duly approved by their respective boards. Standards for IPOs The Institute of Actuaries of India has issued Actuarial Practice Standard 10 (APS 10) to determine the Indian embedded value (IEV) of life insurance companies incorporated in India that are considering initial public offerings (IPOs). Within that context, IRDA regulations require companies to disclose their embedded value in order to demonstrate their compliance with applicable eligibility criteria. The embedded value report must be prepared by an independent actuarial expert and peer- reviewed by another independent actuary. This standard uses several concepts from the CFO Forum’s European Embedded Value (EEV) Principles and Guidance and Basis for Conclusions and the European Insurance CFO Forum Market Consistent Embedded Value Principles (the MCEV Principles) and related documents. Currently, no insurance companies are listed; however, a few are internally gearing up to meet the underlying requirements. Looking forward Due to the challenges in duplicating a Solvency II approach, India is expected to follow the broader parameters of countries such as the US, the UK and Canada. IRDA is planning for insurance companies to shift from the current factor-based solvency model to an RBC framework. Due to the challenges in duplicating a Solvency II approach, India is expected to follow the broader parameters of countries such as the US, the UK and Canada. The IRDA expects this risk-reporting regime to commence in three to four years. IRDA is also focusing on various enterprise risk management components, including data controls and governance (risk management committee, risk management strategy and a CRO with clearly defined functions). A committee was established in December 2011 to recommend a roadmap toward a risk-based solvency assessment.
20 Indonesia Introduction Indonesia is one of Southeast Asia’s largest economies and presents a huge untapped market for the insurance industry.
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