IRDAI issued IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 (“AFIF Regulations”)1 which are applicable to all insurers, including reinsurers. They prescribe management practices for actuarial, finance and investment functions and conditions for loan and advances by insurers in India. Pursuant to these regulations, insurers are required to formulate policies for actuarial, finance and investment functions, such as bonus distribution philosophy, asset-liability management, investment and risk management. These regulations repeal 9 (nine) regulations.2
Subsequently, a master circular was issued to provide guidance on various provisions of AFIF Regulations.3 It applies to all insurers including those engaged exclusively in re-insurance business, unless otherwise specifiesd. The master circular is divided into 3 (three) broad heads: (a) actuarial function; (b) finance function; and (c) investment function. Some of the key provisions of the master circular are as follows:
- Actuarial function: It details provisions relating to appointment of appointed actuary/mentor actuary/consulting actuary/certifying actuary; prescribes valuation provisions and returns to be filed for life, general, standalone health insurance and reinsurance business.
- Finance function: All insurers must furnish the annual financial statements and other filings with IRDAI within 3 (three) months from end of the financial year, or within 30 (thirty) days from the date of adoption of accounts by the board, whichever is earlier.
- Investment function: It prescribes the various categories of investments and the valuation methodology for investment in such categories by insurers. Insurers must ensure that there are proper risk management systems with respect to investment. Insurers must build an adequate expertise in equity research by establishing a dedicated equity research department, corresponding with the scale of their operations. They must ensure robust internal credit rating systems to ensure continuous monitoring of the rating migration of the issuers/issues.
Footnotes
1. Notification dated March 20, 2024. F. No. IRDAI/Reg/10/204/2024
2. The repealed regulations are IRDAI (Actuarial Report and Abstract for Life Insurance Business) Regulations, 2016; Insurance Regulatory and Development Authority (Distributions of Surplus) Regulations, 2002; IRDAI (Assets, Liabilities and Solvency Margin of Life Insurance Business) Regulations, 2016; IRDAI (Assets, Liabilities and Solvency Margin of General Insurance Business) Regulations, 2016; IRDAI (Appointed Actuary) Regulations, 2022; IRDAI (Investment) Regulations, 2016; IRDAI (Preparation of Financial Statements and Auditors' Report of Insurance Companies) Regulations, 2002; IRDAI (Inspection and Fee for Supply of Copies of Returns) Regulations, 2015; and IRDAI (Loans or Temporary Advances to Full Time Employees of the Insurers) Regulations, 2016.
3. Circular dated May 17, 2024. F. No. IRDAI/ACTL/CIR/MISC/80/05/2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.