To


All CEOs of Life Insurance Companies

Economic Capital

In the last two / three meetings with the Appointed Actuaries of life insurance companies, it has been clearly told that they have to initiate the process of calculation of economic capital and submit the same along with the Appointed Actuaries’ Annual Report beginning the actuarial valuation for the year ending March 2010.

In this context the basic reference material is the “Report of the Committee to draw the road map for moving towards Economic Capital and market consistent embedded value for life insurance industry in India ( June 8, 2009)” constituted by the Institute of Actuaries of India for this purpose.

While annexure -1 of this circular gives the background of the Economic capital in a brief summary form, annexure -2 gives the related table and other details required in this context.

Whenever the appointed actuaries deviate from the suggested practice they have to explain the rationale of the same and give further details.

This circular comes into effect for the actuarial valuation of the liabilities for the life insurers since March end 2010. Please note that at this stage it is envisaged that this exercise will be done on an annual basis, coinciding with the actuarial valuation for the March end position.

On the basis of experience the contents of the circular would be reviewed on or before October 30, 2010.

Sd/-
R. Kannan
Member (Actuary)