Acturies in INDIA

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INDEX

SR.

NO.CONTENTS

1. RESEARCH DESIGN

2. INTRODUCTION

3 . EVALUTION OF ACTUARIAL PROFESSION

4. ROLE OF ACTUARY IN INSURANCE

5. ACTURIAL INSURANCE IN INDIA

6. ACTUARIAL SOCIETY OF INDIA

7.GLOBAL INSURANCE SCENARIO & CHALLENGES

FOR ACTUARY

8.RISK AND ACTUARIAL SCIENCE

9. CONCLUSION


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1. RESEARCH DESIGN

"Actuary in Insurance" was for the first time came to be

noticed in Insurance magazine's article a few months back. When

the topic was opened for discussion with couple of persons

associated with insurance industry, the canvass and importance

of the subject was immediately noticed. This was the ignition

point which prompted to undertake the study of "Actuary in

Insurance" as a project.

An actuary is a combination of business executive,

mathematician, financier, sociologist, and investment manager.

Actuaries are the analytical backbone of our society's financial

security programs. The hypothesis of the study of 'Actuary in

Insurance' as with the advent of this new profession in Insurance

industry would competent to minimize risk in superior way.

The nature of study was decided to be of exploratory nature.

The objective of the study was to document detailed information on

Actuary in insurance so that the project report could serve as

the multi dimensional. The geographical limit for the study was

'Mumbai' only. The information was sourced from various articles

on Actuary in Insurance sector which appeared in insurance

journals published by Actuarial society of India and IFCI

university press, both being the premiere institutes in India in the

field of actuarial insurance. Besides having collected the data from

various books, journals and internet sites, an interview with

insurance officials and corporate have added the practical flair

mainly to know the onsite implications and procedural difficulties.


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2. INTRODUCTION

Actuaries are the analytical backbone of our society's

financial security programs. They are the brains behind the

financial safeguards we have implemented in our personal lives,

so we can go about our daily lives without worrying too much

about what the future may hold for us.^ These are the safeguards

that protect us from life's catastrophes. The insight into risk that

actuaries have also helps to ensure that our savings are workinghard for us, so that everything we love and cherish can grow and

flourish.

Actuarial science applies mathematical and statistical

methods to finance and insurance, particularly to risk assessment.

Actuaries are professionals who are qualified in this field through

highly competitive examinations and experience. It includes a

number of interrelating disciplines, including probability and

statistics, finance, and economics. Historically, actuarial science

used deterministic models in the construction of tables and

premiums. The science has gone through revolutionary changes

during the last 30 years due to the proliferation of high speed

computers and the synergy of stochastic actuarial models with

modern financial theory.

Actuarial science became a formal mathematical discipline in

the late 17th century with the increased demand for long-term

insurance coverages such as Burial, Life insurance, and Annuities.

These long term coverages required that money be set aside to

pay future benefits, such as annuity and death benefits many


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years into the future. This requires estimating future contingent

events, such as the rates of mortality by age, as well as the

development of mathematical techniques for discounting the value

of funds set aside and invested. This led to the development of an

important actuarial concept, referred to as the Present value of a

future sum. Pensions and healthcare emerged in the early 20th

century as a result of collect ive bargaining.

Certain aspects of the actuarial methods for discounting

pension funds have come under criticism from modern financial

economics.

Actuaries describe their work as challenging and interesting

and generally enjoy a good working environment. The Jobs

Rated Almanac has consistently rated "Actuary" as one of the top

two or three jobs on a variety of factors. According to several

studies, the profession is more; open than others to women and

members of under-represented minority groups. Actuaries are in

high demand, with starting salaries ranging from $45,000 to

$55,000. In 2002, a Wall Street Journal survey on the best jobs in

the United States listed actuary as the second best job, while in

previous editions of the list, actuaries had been the top rated job.


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3. EVOLUTION OF ACTUARIAL

PROFESSION

The actuarial profession has a rich and varied history dating

back to the seventeenth century when John Graunt, a London

draper, demonstrated that there were regularities to the patterns of

life and death in a group of people, despite uncertainty about the

future life-span of a single individual.

3.1 Risk gives birth...

The basic requirements of communal interests gave rise to

risk sharing since the dawn of civilization. In the ancient world there

was no room for the sick, suffering, disabled, aged, or the poor

these were largely not part of the cultural consciousness of

societies. The need for insurance and pension arrangements

comes from personal risk and uncertainty. If you go on a journey

or voyage, there is the risk of losing any goods entrusted to you, or

your own possessions, or even your life. Your house may catch

fire and leave you and your family without a roof over your heads.

If you are a breadwinner, you run the risk of dying too soon and

leaving your family to starve. You may be unable to get a loan, if

the lender is worried about repayment in the event of your death.

Alternatively, you may live too long after retirement, so that your

savings become exhausted.

3.2 Initiate by the charity...

These risks existed from the earliest times, when the

usual method of relieving poverty was by charity. Destitute people


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used to beg on the streets. Nearby monasteries might have

provided them with left-over food and drink, or the monks' cast-off

clothing. Under this method of protection; religious organizations or

neighbors would collect for the destitute and needy. However,

charity was never very satisfactory, because it provided inadequate

and uncertain relief, with a social stigma.

Hence people tried to protect themselves financially against

the risks of life and death. They developed elementary insurance-

type arrangements, which often failed because of a lack ofknowledge and understanding. Pensions were granted even in

ancient Greece, and burial societies were formed in both Greece

and Rome to meet members' funeral expenses. In England in the

Middle Ages it was sometimes possible to pay a lump sum to a

monastery and receive board and lodging (known as a 'corrody')

there for the rest of your life.

3.3 Development of theory...

The 17th century was a period of extraordinary advances in

mathematics Li Germany, France, and England. At the same

time there was a rapidly growing desire and need to place the

valuation of personal risk on a more scientific basis.

Independently from each other, compound interest was studied

and probability theory emerged as a well understood mathematical

discipline. Compound interest was studied, which was important

later in establishing how much investment income could be earned

by the assets of insurance and pension funds. Probability theory

emerged with a publication in 1657 by the Dutch mathematician,

Christian Huygens. He showed that, in order to have p chances of


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obtaining a sum of money A and q chances o: obtaining a sum of

money B, it is worth paying a sum equal to (pA+qB) divided by

(p+q).

Another important advance came in 1662 from a surprising

source, a London draper called John Graunt who showed that

there were predictable patterns of longevity and death in a

defined group, or cohort, of people, despite the uncertainty about

the future longevity or mortality of any one individual person. This

study became the basis for the original life table. It was now-

possible to set up an insurance scheme to provide life insurance or

pensions, for a group of people, and to calculate with some degree

of accuracy how-much each person in the group should contribute

to a common fund assumed to earn a fixed rate of interest. His

great achievement was to show the regularities of the patterns of

life and death in a group of people, despile uncertainty about thefuture lifetime of only one person. He had the original idea of

making a statistical analysis of the London Bills of Mortality. These

had been published for many years, week by week, to warn

wealthy householders when the plague was increasing, so that

they could leave London in time.

Although the age at death was not recorded in the Bills

Graunt analyzed, every Bill did record the number of people dying

from each cause of death. Since some causes of death applied

mainly to young children, he deduced that about 36% of the total

number of deaths related to children dying before age six. This was

the starting point for his famous 'life table', which showed how many

of every 100 babies survived until ages 6, 16, 26, 36, 46 ... etc.


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Unfortunately the table did not give a realistic representation of true

survival rates, because the figures for ages after 6 had to be

guessed. Graunt also estimated the population of London, which

was often said to run into millions, as 384,000. This is thought

nowadays to have been quite accurate -another remarkable

achievement.

3.4 Creation of actuarial science...

It now became possible for the first time to envisage setting

up an insurance scheme providing life assurance or pensions for agroup of people, where it could be worked out how much money

each person in the group should contribute to a common fund

assumed to earn a fixed rate of interest.

The first person to demonstrate publicly how this could be

done was Edmond Halley, the famous mathematician andastronomer, after whom the comet is named. The Royal Society in

London asked Halley to analyze some data collected by Caspar

Neumann, a clergyman of Breslau in Germany, relating to the

births and deaths in that city between 1687 and 1691. Unlike the

London data, the Breslau data were classified by age, and this

enabled more accurate survival rates at each age to be obtained.

Halley used the data in 1693 to construct his own life table (for

individual ages, not just age groups), which was found to give a

reasonably accurate picture of survival and became well known

throughout Europe.

Most important, however, was the method which Halley

demonstrated of using his life table to work out how much money


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someone of a given age should pay to purchase a life-annuity.

Halley examined each future annual installment of the annuity

separately and used his life table to estimate the probability that the

person would survive to receive that installment. The resulting

probability was multiplied by the sum (obtained from a compound

interest table at a specified rate of interest) which would need to be

invested now in order to pay for that installment if one were

certain to receive it. Halley then went on to do likewise for the

next installment, and so on. Summing these present values for all

future installments up to the end of life then gave the value of the

whole annuity. Actuarial science had been created.

3.5 Early actuaries...

The first life assurance company to use premium rates which

were calculated scientifically for long-term life policies was The

Equitable, founded in 1762. The techniques used to calculatethese premiums were developed from Halley's method by

James Dodson, a London mathematician. Janes Dodson's

pioneering work on the level premium system led to the formation

of the Society for Equitable Assurances on Lives and Survivorship

(now commonly known as Equitable Life) in London in 1762.

After Dodson's death, Edward Rowe Mores took over theleadership of the group that eventually became the Society for

Equitable Assurances in 1762. It was he who specified that the

chief official should be called an 'actuary'. Previously, the use

of the term had been restricted to an official who recorded the

decisions, or 'acts', of ecclesiastical courts, in ancient times

originally the secretary of the Roman senate, responsible for

compiling the Acta Senatus. Other companies which did not


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originally use such mathematical and scientific methods most

often failed or were forced to-adopt the methods pioneered by

Equitable. Many other life assurance companies and pension

funds were created over the following 200 years. It was The

Equitable which first used the term 'actuary' for its chief executive

officer in 1762.

3.6Development of the modern profession...

In the eighteenth and nineteenth centuries, computational

complexity was limited to manual calculations. The actualcalculations required to compute fair insurance premiums are

rather complex. The actuaries of that time developed methods to

construct easily-used tables, using sophisticated approximations

called commutation functions, to facilitate timely, accurate, manual

calculations of premiums. Over time, actuarial organizations were

founded to support and further both actuaries and actuarialscience, and to protect the public interest by ensuring competency

and ethical standards. However, calculations remained

cumbersome, and actuarial shortcuts were commonplace.

In 1848 the actuaries of a number of life assurance companies

established the Institute of Actuaries. Its objects were stated to be

the development and improvement of the mathematical theories

upon which the practice of life insurance is based, and the

collection and arrangement of data connected with the subjects of

duration of life, health and finance. Another object was the

improvement and diffusion of knowledge, and the establishment

of correct principles relating to subjects involving monetary

considerations and probability. Thus even so long ago, the


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Institute's objectives were by no means confined to life

assurance. It was clearly envisaged that actuarial science would

have wider applications, as has proved to be the case.

Non-life actuaries followed in the footsteps of their life

compatriots in "he early twentieth century. The 1920 revision to

workers compensation rates took over two months of around-the-

clock work by day and night teams of actuaries. In the 1930s and

1940s, however, rigorous mathematical foundations for

stochastic processes were developed. Actuaries could now begin

to forecast losses using models of random events instead of

deterministic methods. Computers further revolutionized the

actuarial profession. From pencil-and-paper to punchcards to

microcomputers, tie modeling and forecasting ability of the actuary

has grown exponentially.

Another modern development is the convergence of modem

financial theory with actuarial science. In the early twentieth

century, actuaries were developing many techniques that can be

found in modem financial theory, but for various historical reasons,

these developments did not achieve much recognition.

However, in the late 1980s and early 1990s, there was a

distinct effort for actuaries to combine financial theory and

stochastic methods into their established models. Today, the

profession, both in practice and in the educational syllabi of many

actuarial organizations, combines tables, loss models, stochastic

methods, and financial theory, but is still not completely aligned

with modern financial economics.


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4. ROLE OF ACTUARY IN INSURANCE

Most actuaries are employed in the insurance industry,

specializing in life and health insurance or property and casualty

insurance. About two-thirds of actuaries work for life, health, and

property / casualty insurance companies. At this time, the majority

of actuaries work in careers that are associated with the

insurance industry, though growing numbers work in other fields.

They are heavily involved in insurance because that is society's

most powerful answer for managing risk.

Each type of business assumes financial risks for people

and pays their claims as incurred. Actuarial responsibilities in

these fields will generally include making sure that one's company

properly defines and carefully evaluates the insurance risk;charges a fair price to assume the risk; and has an efficient system

to pay claims and expenses as they occur while operating profitably

as a business. These responsibilities are important because when

the actuary calculates the cost of insurance contracts for his

company, he is committing it financially for many years. This

commitment is why a Company's financial solvency depends to alarge extent on the actuary's calculations and judgment.

Thus, One of the main functions of actuaries is to help

businesses assess the risk of certain events occurring and to

formulate policies that minimize the cost of that risk. For this

reason, actuaries are essential to the insurance industry.Actuaries assemble and analyze data to estimate the probability


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and likely cost of the occurrence of an event such as death,

sickness, injury, disability, or loss of property. Actuaries also

address financial questions, including those involving the level of

pension contributions required to produce a certain retirement

income and the way in which a company should invest resources

to maximize its return on investments in light of potential risk.

Using their broad knowledge of statistics, finance, and business,

actuaries help design insurance policies, pension plans, and other

financial strategies in a manner which will help ensure that the

plans are maintained on a sound financial basis.

Actuaries play a key role to design insurance plans,

determine the premium, monitor the profitability of insurance

companies and recommend corrective action when appropriate.

Actuaries are involved in pricing, product design, financial

management and corporate planning. Actuaries working in

insurance companies also ensure that insurance companies have

set aside enough funds to pay claims and provide advice on

how to invest tie insurance companies' assets. They use their

professional expertise in solving complication financial problems by

combining their theoretical as well as practical knowledge.

Actuaries produce probability tables which determine the

likelihood that a potential future event will generate a claim. From

these tables, they estimate the amount a company can expect to

pay in claims. For example, property and casualty actuaries

calculates the expected amount payable in claims resulting from

automobile accidents, an amount that varies with the insured

person's age, sex, driving history, type of car, and other factors.


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Actuaries ensure that the price, or premium, charged for such

insurance will enable the company to cover claims and other

expenses. The premium must be profitable, yet competitive with

other insurance companies. Within the 1ife and health insurance

fields, actuaries are helping to develop long-term-care insurance

and annuity policies, the latter a growing investment tool for many

individuals.

Actuaries are not only experts who perform actuarial analysis

of insurance rates, rating procedures, rating plans, and schedules

of insurance companies but also professionals who are

experienced in reviewing and analyzing insurance operations,

reserves and underwriting procedures and provide technical

assistance regarding actuarial matters to policy examiners and

other technical staff. In other words they are the people who

ascertain in advance the uncertain events that could take place in

future and come to a financial conclusion. Actuaries also hold a

legal responsibility for protecting the benefits promised by

insurance companies. Their role demands the highest standards of

personal integrity and application of professional skills. Actuaries

balance their role in business management with responsibility for

safeguarding the financial interests of the public.

Actuaries' insurance discipline may be classified as life

insurance, health insurance, pensions; annuities, asset

management, social welfare programs, property insurance,

casualty insurance, liability insurance, general insurance; and

reinsurance. Life, health, and pension actuaries deal with mortality


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risk, morbidity, and consumer choice regarding the ongoing

utilization of drugs and medical services risk, and investment risk.

Products prominent in their work include life insurance, annuities,

pensions, mortgage and credit insurance, short and long term

disability, and medical, dental, health savings accounts and long

term care insurance. In addition to these risks, social insurance

programs are greatly influenced by public opinion, politics, budget

constraints, changing demographics and other factors such as

medical technology, inflation and cost of living considerations.

Whereas casualty actuaries, also known as non-life or

general insurance actuaries, deal with catastrophic unnatural risks

that can occur to people or property. Products prominent in their

work include auto insurance, homeowners insurance,

commercial property insurance, workers' compensation, title

insurance, malpractice insurance, products liability insurance,

directors and officers liability insurance, environmental and

marine insurance, terrorism insurance and other types of liability

insurance. Reinsurance products have to accommodate all of the

previously mentioned products, and in addition have to properly

reflect the increasing long term risks associated with climate

change, cultural litigiousness, acts of war, terrorism and politics.

On both the life and casualty sides, the classical function of

actuaries is to calculate premiums and reserves for insurance

policies covering various risks. Premiums are the amount of

money the insurer needs to collect from the policyholder in order

to cover the expected losses, expenses, and a provision for profit.

Reserves are provisions for future liabilities and indicate how much


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4.1 Actuary in Life Insurance

Actuaries have traditionally worked in life insurance, and their

role and responsibilities have evolved as life insurance itself has

developed external relations. Their traditional areas of activity

include designing and pricing contracts, monitoring the adequacy

of the funds to provide the promised benefits and recommending

the fair rate of bonuses to be added to with-profit policies. While

the main function of an actuary in life insurance has remained thesame, viz. assessment and valuation of mortality risk apart from

other risks.

In life insurance, actuarial science focuses on the analysis of

mortality, the production of life tables, and the application of

compound interest to produce life insurance, annuities andendowment policies. Contemporary life insurance programs

have been extended to include credit and mortgage insurance,

key man insurance for small businesses, long term care insurance

and health savings accounts.

Nowadays, actuaries employed by life insurancecompanies may also provide expert advice on investment,

planning and marketing of products, strategic risk measurement

and almost any aspect of the work of the company. The Life

Board oversees the profession's concern with all actuarial matters

related to life insurance business. Because of the wide range of

these matters, the Board is supported by a number of committees

dealing with Supervision, Conduct of Business Regulation,


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Education and CPD, and Research. The work of the Continuous

Mortality Investigation Bureau is also a major contributor to

actuarial practice in this area.

Duties of an actuary in life insurance business...

In case of the insurer carrying life insurance business the

actuary shall perform the following duties...

Certify the actuarial report, abstracts and other

returns;

Comply with provisions of section 112 of the Act,

1938 in regard to further information required by the authority and

recommendation of interim bonus or bonuses payable by life

insurer to policyholders whose policies mature for payment by

reason of death or otherwise during the inter-valuation period;

Comply with provisions of section 40B of the Act,

1938 in regard to the bases of premium;

Ensure that premium rates of insurance products are

fair;

Certify that the mathematical reserves have been

determined taxing into account the guidance not issued by the

Actuarial Society of India and any directions given by the Authority;

Ensure that the policyholders reasonable

expectations have been considered in the matter of valuation of

liabilities and distribution of surplus to the participating

policyholders who are entitled for a snare of surplus; and Submit

the actuarial advice in the interests of the insurance industry and

the policyholders.


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4.2 Actuary in Health Insurance

In health insurance, including insurance provided directly by

employers, and social insurance, actuarial science focuses on

the analyses of rates of disability, morbidity, mortality, fertility and

other contingencies. The effects of consumer choice and the

geographical distribution of the utilization of medical services and

procedures, and the utilization of drugs and therapies, is also of

great importance. Actuarial science also aids in the design of

benefit structures, reimbursement standards, and the effects of

proposed government standards on the cost of healthcare.Health

insurance sector offers the most exciting opportunities and yet

poses the biggest problems for the actuaries in India. This is

because...> The country has very little experience of his own in this

field to rely upon, except in the case of medical insurance

sold by GJC subsidiaries; and

> The types of covers provided under this generic term

in western countries is quite large, viz. private medical insurance

(PMI), critical illness cover (CIC), long term care insurance (LTCI)and permanent health insurance (PHI). Even within each type the

variety of terms and benefits can be large, leading to different

rating methods, valuation assumptions, solvency margins,

investment strategy, etc.

So, where do the actuaries look for the designing health

covers suitable for Indian conditions? As far as medical insurance

and public health insurance (PHI) are concerned, the experience of


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GIC and Employee State Insurance Scheme (ESIS) respectively

can provide useful initial guide. We can draw on the long

experience of the US health business in general. The US

economy spends 15 per cent of its GDP on health care.

With the persistent weakening of joint family system in

urban areas and growing proportion of aged population, the need

for insurance for the elderly is likely to grow. Hence, the insurers

and the actuaries must prepare themselves well in advance to

exploit this potential demand. The first challenge to actuaries in

this field will be designing of different types of health covers,

keeping in view the objectives of...

A need-based approach;

Simplicity of benefits and administration, and

Avoidance of fraud and anti-selection.

Their role would also include collection and analysis of

morality data and advising the government on an effective

regulatory mechanism, so as to protect the interests of the

policyholders.


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4.3 Actuary in Non Life Insurance...

Although it is still true that only a relatively small part of

the actuarial profession works in general insurance, there has

been a significant growth in recent years. The role of actuary in

non-life insurance is as follows...

Estimating the reserves for the future claims of.

Helping a company identify its

management information requirements

Helping a motor insurer establish the relative rate

levels for different rating groups.

Advising a building society on the capital requirements

for its captive insurance company.

Advising a reinsurance company on its rates for

Catastrophe Excess of Loss reinsurance.

One area that has seen major involvement of actuaries in

general insurance is the estimation of claims reserves (that is,

future claims). This is not in automated procedure, as there is a

significant amount of judgment involved in the estimation of

general insurance reserves.

Management information is an example of an area that is

not typically actuarial, but where a general insurance actuary

has a lot to offer. By applying his or her knowledge of the various

aspects of the business, -in actuary can help a company to identify


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the key indicators that management should monitor so as to control

the business.

Actuarial science is also applied to short term forms of

insurance, referred to as Property & Casualty or Liability insurance,

or General insurance. In these forms of insurance, coverage is

generally provided on a renewable annual period, (such as a yearly

contract to provide homeowners insurance policy covering damage

to a house and its contents for one year). Coverage can ~)e

cancelled at the end of the period by either party.

In the property & casualty insurance fields, companies tend

to specialize because of the complexity and diversity of risks. A

convenient division is to organize around personal and commercial

lines of insurance. Personal lines of insurance include the familiar

fire, auto, homeowners, theft and umbrella coverages. Commercial

lines would include business continuation, product liability, fleet

insurance, workers compensation, fidelity & surety, D&3 insurance

and a great variety of coverages required for businesses.

. Actuaries do not always attempt to predict aggregate future

events. Often, their work may relate to determining the cost of

financial liabilities that have already occurred, called retrospective

reinsurance or the development or re-pricing of new products.

Actuaries also design and maintain products and systems.

They are involved in financial reporting ofcompanies' assets and

liabilities. They must communicate complex concepts to clients

who may not share their language or depth of knowledge.

Actuaries work under a strict code of ethics that covers their


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communications and work products, but their clients may not

adhere to thoses same standards when interpreting the data or

using it within different kinds of businesses.

Beyond these, the industry needs to provide catastrophe

insurance for weather related risks, earthquakes, patent

infringement and other forms of corporate espionage, terrorism and

all its implications, and finally coverage for the most unusual risks

sometimes associated with Lloyds of London. In all of these

ventures, actuarial science has to bring data collection,

measurement, estimating, forecasting, and valuation tools to

provide financial and underwriting data for management to

assess marketing opportunities and the degree of risk taking that is

required. Actuarial science needs to operate at two levels...

At the product level to facilitate politically correct

equitable pricing and reserving; and

At the corporate level to assess the overall risk to the

enterprise from catastrophic events in relation to its underwriting

capacity or surplus

Actuaries, usually working in a multidisciplinary team must

help answer management issues... Is the risk insurable;

Does the company have effective claims

administration to determine damages;

Does the company have sufficient claims

handling to cover catastrophic events;


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And the vulnerability of the enterprise to uncontrollable risks

such as inflation, adverse political outcomes; unfavorable legal

outcomes such as excess punitive damage awards, and

international turmoil.

4.4 Actuary in general insurance

business

With the growing complexity of business operations and

increasing technological development, individuals and companies

are coming face to face with newer and greater risks, e.g. risks

of computer breakdowns, satellite communication failures,

financial losses suffered by professionals from client litigation, etc.

these risks provide increased opportunities of profitable businessfor insurance companies and thus open up additional career

avenues for actuaries.

Risk management has become an important managerial

function in large business houses, where a professional risk

manager assesses the nature and extent of the company'sexposure to a specific mix of risks and decides whether to retain

the risk in house or to transfer it to an insurance company.

Nevertheless, even in case of risk retention, companies do

seek other services such as underwriting, actuarial and risk

management advice from insurers. It is here that the general

insurance actuary has to demonstrate his competence not only in

accurate risk appraisal, but also in understanding the needs of the


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business manager, so as to build up a mutually beneficial ind

long lasting relationship between the insurers and the business

community.

4.5 Actuary in Reinsurance

In the reinsurance fields, actuarial science is used to

design and price reinsurance and retro-reinsurance schemes, andto establish reserve funds for known claims and future claims and

catastrophes. Retro-reinsurance, also known as retrocession

occurs when a reinsurance company reinsures risks with yet

another reinsurance company.

Reinsurance can be used to spread the risk, to smoothearnings and cash flow, to reduce reserve requirements and

improve the quality of surplus, Reinsurance creates arbitrage

situations, and retro-reinsurance arbitrage can create Spirals

which can lead to financial instability and bankruptcies A spiral

occurs (as an example) when a reinsurer accepts a retrocession

which unknowingly contains risks that were previously reinsured.

Some reported cases of arbitrage and spirals have been found to

be illegal. The Equity Funding scam was built on the abusive

use of financial reinsurance to transfer capital funds from the

reinsurance carrier to Equity Funding. In the broadest sense of the

word, reinsurance takes many forms...

Declining a risk;

Requiring the insured to self insure part of the


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contingent or investment risk;

Limiting the coverage through deductibles,

coinsurance or exclusionary policy language;

Placing a policy in a risk pool with a cohort of

competitors to achieve a social objective;

Ceding or transferring a percentage of each

policy to another insurance company (i.e. the reinsure);

Ceding or transferring excess amounts or excess

coverages to the reinsure;

Purchasing stop loss insurance;

Purchasing umbrella coverages for a basket of risks;

Purchasing catastrophe insurance for specific

contingent events.

Reinsurance is complex. Company management and their

actuaries need to deal with all the known insurable contingent

events, as well as underwrite the quality of their cadent

companies, and maintain the information tools and auditing

practices to identify arbitrage and spirals.


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4.6 Actuary in Investment Policies...

Actuaries need to be closely associated with framing ofinvestment policies of insurance companies, since better than

average investment return is often the biggest source of surplus,

particularly in life insurance. It is also the unique selling

proposition in unit-linked business, which is growing in popularity

worldwide, in relation to the traditional life insurance policies.

The basic objective of investment policy in an insurance

company remains unchanged, viz. to match the cash flows (both in

terms of timing and amount from assets to those from liabilities,

i.e. insurance contracts, so as to minimize the 'actuarial risk', i.e.

the probability of not being able to meet the liabilities when due, and

subject to the above goal, to maximize the return on assets,

especially in the long-term.

However, it is the balance between these two objectives of

risk and return and the precise methods of achieving the goal that

is undergoing a radical change, with the evolution of ever-new

investment products.


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5. ACTURIAL INSURANCE IN INDIA

The opening of the insurance sector has also thrown a great

challenge to the actuarial profession in India. The demand for

actuarial skills and knowledge is growing up exponentially and the

actuarial profession in India is gearing up its activities to meet this

demand.

The actuary is a specialist who combines an understanding

of risks and mathematical technique to develop financial products

to manage these risks (insurance policies), price these product

(calculate insurance premium rates) and compute reserves to be

held for liabilities of companies undertaking these financial risks.

An actuary may also be described as an applied mathematician

responsible for the financial mathematics in insurance policies.

In a broader sense, actuaries have been described as the

professionals to call whenever money and probability interact.

The actuary helps in designing insurance plans and then

evaluates the financial risk of the company which it takes while

selling an insurance policy. The responsibilities as an actuary

include making sure that the company properly defines and

carefully evaluates the insurance risk; charge a fair price to suit


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the risk; and has an efficient system to pay claims and expenses

as and when they occur. Actuaries must understand the entire

operation of insurance field because their evaluations often

influence organization policies and practices.

In fact, actuaries' calculations and judgment can commit

organizations financially sound for future years. Because of many

phases of organization's business such as general management,

marketing, research, investments, accounting, underwriting,

administration and long range planning, the actuaries gave great

role to play in the insurance industry.

Most actuaries working in insurance sector are mainly in life

insurance. They are found in high responsible management

positions making decisions that are vital to the company's

success. Insurance is a highly competitive business and

actuaries are constantly making commercial decisions, which

nevertheless must have a sound theoretical basis. The actuary's

day-to-day tasks involve fixing premium rates and surrender

values for policies and designing new types of policies. Actuaries

have to make calculations also such as what funds will be

needed to cover the company's long-term liabilities and advice

on how profits should be distributed to policyholders and

shareholders.

5.1 Appointed Actuary in India...

An insurance company has to take the assistance of an

actuary in conducting the business of insurance. The IRDA in

consultation with the Insurance Advisory Committee has made

regulations for appointment of actuary. Regulation 5 of the IRDA


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(appointed actuary) Regulations, 2000 provides that a life insurer

shall not carry on business of insurance without an appointed

actuary. The term 'appointed actuary' is a designation.

5.2 Eligibility...

A person shall be eligible to be appointed as an appointedactuary for an insurer, if he or she shall be...

Ordinarily resident in India;

Fellow member of the actuarial society of India;

An employee of the insurer or a consulting actuary in case

of general insurance business:

An employee of life insurer in case of life insurance business;

A person who has not committed any breach of

professional misconduct;

A person against whom no disciplinary action by the Actuarial

Society of India or any disciplinary action pending with any other

actuarial professional body:

Not an appointed actuary of another insurer;

A person who possesses a certificate of practice

issued by the Actuarial Society of India; and

Not over the age of seventy years

5.3 Approval of IRDA...


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An insurer shall seek the approval of the Authority for the

appointment of appointed actuary by submitting the application in

prescribed Form IRDA-AA-1. The authority shall, within thirty

days of the receipt of such application either, accept or reject the

same, however, before rejection of the application the authority

(IRDA) shall give the insurer an opportunity of being heard.

Where an insurer does not receive approval within thirty days of

the receipt of such application by the Authority, the insurer shall

deem that the approval has been granted by the Authority.

5.4 Relaxation of Qualification of Actuary..

Where an insurer is unable to appoint an actuary in

accordance with the regulations prescribed for qualifications of an

appointed actuary (sub-regulation (2) of regulation 3 of IRDA

(appointed Actuary) regulations, 2000) he may make anapplication to the Authority in writing for relaxation of one or more

conditions mentioned therein. The Authority shall on receipt of the

application communicate its decision to the insurer within 30 days

of receipt. The appointment of an appointed actuary shall take

effect from the date of approval by the Authority.

5.5 Cessation of Appointment of Appointed

Actuary...

An appointed actuary shall cease to be so, if he or she has been

given notice of withdrawal of approval by the Authority on the

following grounds...


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That he/she ceases to be eligible in accordance with the sub

regulation (2) of regulation 3 of IRDA (appointed actuary)

regulations, 2000 (sub-regulation (3) prescribes the

qualifications for an appointed actuary) or

That he/she has in the opinion of the Authority, failed to

perform adequately and properly the duties and obligations of

an appointed actuary.

The Authority shall give an appointed actuary a reasonable

opportunity of being heard, if given a notice of withdrawal ofapproval. If a person ceases to be an appointed actuary otherwise

than on grounds of ineligibility or failure to perform duties, the

insurer and appointed actuary is required to inform the Authority the

reasons thereof within fifteen days of such a cassata

5.6 Powers of Appointed Actuary...The appointed actuary has been vested with substantial powers;

the powers having enormous significance in insurance business

are listed below...

An appointed actuary shall have access to all

information or documents in possession, or under control of the

insurer if such access is necessary for the proper and effective

performance of functions and duties of the appointed actuary;

He may seek any information for the purpose of fulfilling his

duties of an appointed actuary from any officer or employee of the

insurer

He is entitled to attend all meeting of the management

including that of the directors of the insurer;


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He is empowered to speak and discuss matter relating to the

actuarial advice given to the directors, matters affecting solvency of

the insurer, matters that may affects the ability of the

insurer to meet the reasonable expectations of policyholders; and

He may attend any meeting of the shareholders or the

policyholders of the insurer or any other meeting of members of

the insurer at which the insurers' annual accounts or financial

statements are to be considered or at which in connection with

the appointed actuary's dutie

5.7 Duties and Obligations of an Actuary...

The duties and obligations of an actuary shall include...

Rendering actuarial advice to the management of the

insurer, in particular in the areas of the product design and

pricing, insurance contract wording , investments and

reinsurance;

Ensuring the solvency of the insurer at all times;

Complying with the provisions of section 64VA of the Act, 1938 in

regard to certification of assets, liabilities that have been

valued accordingly and maintenance of required solvency

margin in the manner required under that provisions;

Drawing the attention of management of the insurer, to any

matter on which he/she thinks that action is required to be taken

prejudice to the interests of the policyholders;

Complying with the Authority's directions from time to time;

Ensuring in general insurance business...


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That the rates are fair in respect of those contracts that are

governed by the insurer's in-house tariff; and

That the actuarial principles, in the determination of

liabilities, have been used in the calculation or reserves for

incurred but not reported (IBNR) and other reserves where

actuarial advice is sought by the Authority;

Informing the Authority in writing of opinion, within a

reasonable time, whether... The insurer has contravened the

insurance act, 1938 or other related statutes; The contravention

is of such a nature that may affect significantly the interests of

the owners or beneficiaries of policies issued by the insurer;

The directors of the insurer have failed to take such action

as is reasonable necessary to enable him to exercise his or her

duties and obligations; or An officer or employee of the insurer

has engaged in conduct calculated to prevent him/her

exercising his/her duties and obligations.

5.8 Absolute Privilege of Appointed Actuary

The appointed actuary shall enjoy absolute privilege to make

any statement, oral or written for the purpose of performance of hisfunctions as appointed actuary. This is, in addition, to any other

privilege conferred upon an appointed actuary under any other

regulations framed by the IRDA. Any provision in the letter of

appointment of the appointed actuary which restricts or

prevents his duties, obligations and privileges shall have no

effect.


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Effects of rejection of the application: the insurer shall, within four

weeks of rejection of the application referred to under regulation

3, apply to the authority for the appointment of a person other

than the one rejected by it under regulation 3 as an appointed


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6. ACTUARIAL SOCIETY OF INDIA

The Actuarial Society of India, known as the ASI, is the sole

professional body of actuaries in India. The Actuarial Society of

India was established in 1944 to provide a central organization

for members of the actuarial profession in India for the purpose

of elevating the attainment and status as also promoting the

general efficiency of all who are engaged in the pursuits of an

Actuary. It is the Indian counterpart of the Institute of Actuaries,

London. Any person with a high degree of aptitude for

mathematics and statistics can become an Actuary. Generally, first

class graduates or postgraduates in mathematics or statistics or

those who had Actuarial Science as an optional subject at the

degree level will be in a better position to qualify as Actuaries. To

become a full-fledged Actuary, one has to clear, through self-study,

a series of examinations by the Actuarial Society of India,

Mumbai.

Since almost all actuaries in India qualified from Institute of

Actuaries, London, the bond between the London Institute and

Indian Society became stronger day-by-day. The Institute of

Actuaries, London always lends full support to the Actuarial Society

of India.

The traditional field for actuaries was life insurance. But

actuaries gradually entered into wider fields like pension, general


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insurance, health insurance and investment. The basic subjects

taught in the actuarial courses are mathematics, statistics and

finance. At the higher level, particularly at fellowship level, a

student has to learn and master application of the basic actuarial

techniques. The method of training helps an actuarial student to

acquire skill for analyzing any type of complex problems. To

become an actuary one must obtain a fellowship by completing

the examinations through one of the following professional

bodies...

Institute if actuaries of England and Wales

Institute of actuaries of Australia

Societies of actuaries of north America

Faculty of actuaries of Scotland

6.1 Registration of the ASI

In 1979, it was admitted to the International Actuarial Association

as a member. On 14th December 1982, it was formally

registered under Registration of Literary, Scientific and

Charitable Societies Act XXI of 1960. A certificate of registration

of the ASI under section XII AA of Income Tax Act was received

on the 14th March 1984. ASI is also registered under Public

Charitable Trust Act 1950.


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6.2 Educational and Ethical Goals of the ASI

To prepare "actuaries of tomorrow" who are adequately

qualified and competent in the global context.

To keep the level of competence on a continuing basis

for fully qualified Actuaries at a high in the global context

through CPD (Continuing Professional Development) and other

programs.

To serve the cause of public interest through Professional

Code of Conduct and Disciplinary Procedures

6.3 Objectives

Advancement of the Actuarial profession in India.

Providing opportunities for interaction among members

of the profession.

Facilitating research, arranging lectures on relevant subjects

Providing facilities and guidance to those studying for the

Actuarial exams.

6.4 History

The ASI was initially started as a non-examining .body when

Actuaries used to get qualified from Institute of Actuaries or

Faculty of Actuaries of the United Kingdom. The actuarial


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profession in India saw a downward trend in the early years of

nationalization of the Indian insurance industry. This had to a

reduction of actuarial input in both life insurance and general

insurance management, and insignificant input in other areas

such as pensions, insurance regulations, and academics. The

downward trend resulted ii a reduction of number of students

taking actuarial exams. In the last few years, the actuarial

profession in India has experienced tremendous growth. The ASI

has grown as well with around 3,000 student members joining

the society. The current president of ASI is Mr. Kannan; who is

also the appointed actuary of SBI Life.

6.5 International Relationships

ASI is founding member of the International Actuarial Association,

the umbrella organization for all actuarial bodies across the world.

The ASI is actively involved in the formulation of future

education strategy of International Actuarial Association.

6.6 Become an Actuary

ASI has stipulated minimum standards to be met before a person

can become its student member. These include graduation instatistics or mathematics, CA, ICWA, MBA etc. Also, any person

with 85 or more marks in Mathematics at 10+2 level can also

apply to become a student. Any person with minimum 18 years of

age and having a high degree of aptitude for mathematics and

statistics can take up this course and become an actuary.

Generally, first class graduates or postgraduates in mathematics,


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statistics, or econometrics will be in a better position than others to

qualify as actuaries.

6.7Qualification in India

To qualify as an actuary, a candidate has to pass all examinations

in the prescribed subjects. In addition, he has to comply with other

criteria such as experience requirement and attendance at a

professionalism course prescribed for the purpose.

6.8 Duration of the Course of Study

There is no fixed duration to complete the course. Since all the 16

subjects prescribed are to be cleared before one is awarded the

Fellowship, continued and sustained effort is necessary to

complete the course. Single minded devotion, total dedication and

a systematic approach to problems are the qualities that will

enable a person to qualify as an actuary within a reasonable

time.

6.9 Actuarial Educational Model in India

The subjects for the examinations can be categorized in to four

groups. The first group Comprises of the CT ( Core Technical)

series; these involve development of theory of actuarial science

and applications of mathematics and statistics to actuarial

applications such as life insurance, general insurance, employee

benefits, investment and other areas. An introduction to economics,

financial economics and financial reporting is also included at this

stage. Although most part of the course is somewhat theoretical,


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the exercise and the question in the examination are practical in

nature as they reflect real life situations of the area of work to

which the subject is applicable. There are in total 8 CT series

papers and all are compulsory.

The second group comprises of CA (Core Applications) series

subjects. CA3 subject is mean to develop skills of communication

of technical aspect of the CT series subjects in simple language to

non-technical persons; here again the stress in examination

question is demonstration of the skills of communications inreal life environment. CA1 deals with the ideas underlying

assets, liabilities and asset-liability management. Also there is a

modelling course CA2. This is a practical course and hence does

not involve written examination. CA series subjects are also

compulsory. On completing CT and CA series students can get title

of AASI.

Next up are ST (Specialist Technical) series examinations. Here,

students can opt for any 2 of the 6 subjects being offered. The

aim is to ensure that the students gain expertise in their related

fields.

Finally, there is one SA (Specialist Application) series subject to be

taken. Here again, there are 6 subjects to choose from.

The actuarial education model, therefore, is ingrained with work

and application and therefore substantially this education beyond

CT series subjects takes place in work environment. The success

through examinations is linked to corresponding work experience


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and insight, thus gained. The examinations given at CT series level

take place, for most of the students in work environment.

7. GLOBAL INSURANCE SCENARIO AND

CHALLENGES FOR THE ACTUARY

An actuary is a financial-cum-mathematic expert who

specializes in the statistical estimation of various risks and their

financial consequences. He thus plays a key role not only in

designing and pricing of risk covers, i.e. insurance policies, but

also in all aspects of insurance company management including

reserving and distribution of surplus, investment of finds,

corporate restructuring and mergers and also regulation of

insurance sector. The insurance industry in India till the year 2000

being a state monopoly, its history of the past few decades has

been one of the stable and rather uneventful growths. However,

one cannot ignore the fact that the insurance business is only one

of the many interrelated financial services, and hence it can no

longer remain unaffected by the vast changes sweeping the entire

financial sector, both in India and abroad.

The most important and interesting development on the financial

scene that we have been witnessing in recent times is a

distinct trend towards integration or convergence of various

financial services into a single business entity that may be

referred to as "a financial super market". In our country this trend is

signaled by disappearance of the dividing line between long-term

project finance and short terms loans, as banks like SBI have


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entered in a big way into term lending business while long-term

financial institutions like IDBI, ICICI and IFCI are making forays into

working capital funds and commercial banking sector.

At the global level, this blurring of the distinctions among various

financial businesses is even more prominent and radical, as

evident from the emergence of concepts like Bane-assurance,

where banking giants have started acquiring life insurance

companies so as to capitalize or their extensive branch

network to sell protection-cum-saving products, while

insurance companies are setting up their own banks and mutual

funds. So much so that even retail chain stores that have always

sold only tangible consumer goods so far, are embarking on

insurance marketing, merely to cash on their competitive edge in

marketing and special rapport with the consumer.

What are the implications of these financial upheavals for the

future of insurance industry in India and for the actuarial

profession, whose development is closely aligned with the

prosperity of this industry?

As the Indian Government has permitted entry of private firms in

insurance business, one thing is certain that all professionals

including actuaries responsible for the blooming of this industry

and its future growth will have to draw heavily upon the vast

experience of insurance industries in developed countries of the

US and Europe and also learn a few significant lessons from the

fortunes and failures of those in other developing countries in

South East Asia. It is quite appropriate and desirable, that for the

Indian actuaries to take a hard look at some of the latest issues that


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are becoming centre-stage in the insurance debates and are

exercising the minds of actuaries all over the world.

The most significant impact of this growing synergy amongfinancial services on actuaries will be an inevitable move towards

closer co-operation with other related professions such as

accountants, engineers, lawyers, marketing specialists, bankers,

investment analysis and so on.

As things stand today, a lack of understanding of what actuary is

and what he or she can do is not only confined to the so-called

laymen but also pervades even 'experts' engaged in these related

professions.

The greatest challenge before an actuary today is how to reach

out to those whose decisions will matter a lot to his own

professional success, how to accept and incorporate their 'non-actuarial' viewpoints into his actuarial principles, theories and

models, and thus be accepted as a useful and pragmatic

decision-maker in the overall management of financial services.

7.1 Strengthening the future role of actuaries...

Other changes, for all life insurers, include replacing the role

currently fulfilled by the Appointed Actuary. Two distinct

actuarial roles, also requiring FSA pre-approval, will be

introduced to ensure that boards obtain actuarial advice on key

aspects of their business. For with-profits business specifically,

there will be a with-profits actuary whose role it is to provide

technical advice to the board focused on the fair treatment of

policyholders. He/she could not be a member of the board. All


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companies undertaking long-term insurance business will be

obliged to have an actuary (actuarial function) to provide technical

advice to the board on issues such as the valuation of

policyholder liabilities.

8. RISK AND ACTUARIAL SCIENCE

The future is full of uncertainty. Some of the events that can

happen are undesirable. "Risk" is the possibility that an

undesirable event will occur.

Actuaries are experts in...

Evaluating the likelihood of future events, designing creative ways

to reduce the likelihood of undesirable events, decreasing the

impact of undesirable events that do occur.

Actuaries are the leading professionals in finding ways to manage

risk. It takes a combination of strong analytical skills, business

knowledge and understanding of human behavior to design and

manage programs that control risk.

Every person and organization faces risk, and it comes in many

forms. Asexperts in measuring and managing risk, actuaries fill a

significant need in our society. Their contribution to society's

psychological, physical and economic well-being is immense. If the

risk management programs actuaries develop don't exist, our

economic growth would be greatly impacted. There are many ways

to manage risk. While, there are some well-established

techniques to manage risk. Some popular techniques include...


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8.1 Focus on catastrophic risks...

Mathematical theory shows that the greatest relief from risk

(and consequently, the greatest increase in peace of mind)

comes from eliminating the consequences of events that are very

unlikely, but result in very big losses. Thus, families should think

about what might happen if the breadwinner dies, their house burns

down, or they lose all of their savings. They should then

implement solutions that reduce the likelihood of these events,

as well as manage their financial impact. This might involve

purchasing a life insurance policy or investing the savings in many

different stocks, to reduce the exposure to any one company's

fortunes. Generally, a few simple measures taken to address

catastrophic risks have a great impact on our well-being.

8.2 Offsetting one risk with another...

Under certain circumstances, two harmful events might possessthe characteristic that when the likelihood of one goes up, the

likelihood of the other goes down. Thus, if we know that when

coffee prices go up, soda prices go down, we might want to

invest in both coffee and soda stocks, to manage our risk

8.3 Risk is a matter of perspective...

What might be harmful to one party might be good for another. For

example, when the value of the dollar goes down against the

French franc, which might be bad for an American business but

favorable for a French business. By trading off the consequences

of an undesirable event with another party who is affected

favorably, both parties are made better off.


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8.4 Diversify...

It is better to take on many small risks than face one big risk.

Many small risks generally average out, to give an outcome that is

not too extreme in one direction or another. Results become more

predictable. Thus, diversification is an important tool in managing

risk. Actuaries may always have been associated with insurance,

but, their skills are in demand elsewhere as the regulation

revolution continues. It is commonly observed that "what gets

measured gets managed". But historically many organizations

assessed risk on a subjective or qualitative basis rather than by

using quantitative disciplines.

8.5 Need of actuaries in risk management...

Today, risk management has become core to good corporate

governance. The understanding and management of risk usingboth quantitative and qualitative measures is increasingly

recognized as a means of achieving strong performance against

financial, social and environmental business objectives.

The actuarial profession has its origins in risk quantification. The

traditional role of actuaries involves quantifying risk to set

adequate insurance premiums. This role has developed over the

years into providing high quality analysis for management and

boards of varying financial services organizations - and also for

regulators.

More recently, actuaries have become involved in other activities

where the demand for better financial risk management has beenincreasing, including banking, funds management, and project


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finance and in the utilities and the resources industries. Actuaries

are relied upon through their professional education and affiliation

to ensure their advice is unbiased and candid. The insurance

business is the business of absorbing risk, both short and long

term. That risk would otherwise be borne by individual people or

businesses, and is often accompanied by considerable volatility. It

is, therefore, not surprising to find some of the most sophisticated

risk frameworks and methodologies in place within insurance

companies.

8.6 Determine risk exposure in banks under Basel II...

From 2007, banks will be required to determine capital

requirements to meet operational risk exposure under Basel II.

Under the advanced measurement approach (AMA), banks will be

able to determine their own approach to the assessment of

exposure to operational risk subject to the approval of the

regulator. The method taken must be comprehensive and

systematic and have demonstrable integrity. Actuaries are working

with other professionals to develop methodologies for the

measurement of risk in banking, which is especially important in an

environment where there are data limitations and the need to find

solutions that balance statistical rigor with a thorough

understanding of operational conditions. The new Basel II

framework is intended to reward stronger and more accurate

risk management and to align the capital requirements of a bank to

its risk appetite. The AMA will mean that capital better reflects

the organization's own risk profile with the benefit of reinforcing the

inter-connectedness of risk, capital and management behavior.

Heightened demand for risk management signals a significant step


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9. CONCLUSION

Actuaries are the backbone of the insurance companies.

They apply mathematical, statistical and economic analysis to a

wide range of practical problems in insurance, investment, financial

planning and management. In short, they are disciplined problem-

solvers. A creative aspect of the work of actuaries is forecasting of

future contingent events. The actuarial profession has a rich and

varied history dating back to the seventeenth century

Actuaries use skills in mathematics, economics, finance,

probability and statistics, and business to help businesses assess

the risk of certain events occurring, and to formulate policies that

minimize the cost of that risk. For this reason, actuaries areessential to the insurance and reinsurance industry, as staff

employees or as consultants, as well as to government

agencies such as the Government Actuary's Department in the

UK or the Social Security Administration in the US.

Actuaries also address financial questions, including those

involving the level of pension contributions required to produce a


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certain retirement income and the way in which a company

should invest resources to maximize its return on investments

in light of potential risk. Using their broad knowledge, actuaries

help design and prices insurance policies, pension plans, and

other financial strategies in a manner which will help ensure that

the plans are maintained on a sound financial basis.

Actuaries play a key role to design insurance plans,

determine the premium, monitor the profitability of insurance

companies and recommend corrective action when appropriate.Actuaries are involved in pricing, product design, financial

management and corporate planning. Actuaries working in

insurance companies also ensure that insurance companies have

set aside enough funds to pay claims and provide advice on

how to invest the insurance companies' assets. They use their

professional expertise in solving complication financial problems-

by combining their theoretical as well as practical knowledge.

An insurance company has to take the assistance of an

actuary in conducting the business of insurance. The IRDA in

consultation with the Insurance Advisory Committee has made

regulations for appointment of actuary. Regulation 5 of the 'IRDA

(appointed actuary) Regulations, 2000' provides that a life insurer

shall not carry on business of insurance without an appointed

actuary.

As things stand today, a lack of understanding of what actuary is

and what he or she can do is not only confined to the so-called

laymen but also pervades even 'experts' engaged in these

related professions. Thus the greatest challenge before an


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actuary today is how to reach out to those whose decisions will

matter a lot to his own professional success, how to accept and

incorporate their 'non-actuarial' viewpoints into his actuarial

principles, theories and models, and thus be accepted as a useful

and pragmatic decision-maker in the overall management of

financial services.

BIBLIOGRAPHY

SR.

NO.SOURCE AUTHOR

Internal sources

1Insurance Fundamental : Environment

and Procedures

B. S.Bodla, M.C.Garg

and K. P. Singh

2 InsuranceJulia Holyahe and

William Weipers

3 Insurance and Risk Management Dr. P. K. Gupta

4 Magazine: Insurance ChronicleThe ICFAI University

Press

External sources

1 Internet search

2 Visit to Actuarial Society of India


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Mumbai

Documents

Acturies in INDIA