increasing share of non-participating business in india – systemic risks associated with it...

Increasing share of non-participating business in India – systemic risks

associated with it

Archana Anoor, Rahul Khandelwal and Rutika Kumar

Guide: Philip Jackson

Agenda

• Introduction

• Life insurance business evolution in India – changes in business mix

• Systemic risk – Definition & triggers– Macro-level– Insurance business (non-par, in particular)– Mitigation Measures

History of Par and Non- Par in India

20002000

20002001

20012001

20022002

20022003

20032003

20042004

20044.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

0

1000

2000

3000

4000

5000

6000

700010 yr Gsec Yield Vs Sensex

10 Year YieldSensex

Yiel

d

Sens

ex

Sources: IRDA Journal, BSE Sensex website, RBI website, Research Report of Miliman


20042004

20042005

20052005

20052006

20062006

20062007

4.05.06.07.08.09.0

10.011.012.0

0200040006000800010000120001400016000


10 Year Yield Sensex

Yiel

d

Sens

ex

20072007

20072008

20082008

20082009

20092009

20092010

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

0

5000

10000

15000

20000


10 Year YieldSensex

Yiel

d

Sens

ex

Sources: IRDA Journal, BSE Sensex website, RBI website, Research Report of Miliman


20112011

20112011

20112011

20112011

20112012

20122012

4.05.06.07.08.09.0

10.011.012.0

0

5000

10000

15000

20000

25000


10 Year Yield Sensex

Yiel

d

Sens

ex

2009-10 2010-11 2011-120%

20%

40%

60%

80%

100%

NB Premium

non par (link) non par (non link) Par

Sources: IRDA Segment wise data, BSE Sensex website, RBI website


Sources: IRDA Journal

2010 - 11 2011 - 12 2012 - 130%

10%20%30%40%50%60%70%80%90%

100%

Tot Value of Investment under various fund – LIC

2010 - 11 2011 - 12 2012 - 130%

10%20%30%40%50%60%70%80%90%

100%

Tot Value of Investment under various fund – Private

UL fund Pension and GA & GF Life Fund

History of Par and Non- Par in IndiaFrom 2013 to Now

4.05.06.07.08.09.0

10.011.012.0

0

5000

10000

15000

20000

25000


10 Year YieldSensex

Yiel

d

Sens

ex

Prospective Regulation - ‘0% customer IRR on Par and Illustrated MB of 90% of premiums paid on ULIPs @4%’• Easier to illustrate for ULIPs - less guarantees than par • More obvious for non par savings contracts (not a reg requirement) • Move towards non-par is expected.

Sources: BSE Sensex website, RBI website

Systemic Risk

Image source: http://www.gardalundur.is/g/images/stories/domino-effect.jpg

Systemic risk

Indicators of systemic Risk

Conclusions of Geneva association Systemic Risk Working Group

Source: FSB, IAIS

Do the findings apply to Indian insurance industry?

Size: Volume of financial services provided by the individual component of the financial system

If LIC is listed it could be the most valuable Indian company at Rs.4.5 – 5 lakh crore (Business Standard, June 2014)

If above metrics are aggregated for all insurers the impact will be higher

Do the findings apply to Indian insurance industry? (contd)

Sources of systemic risk – insurance industry

Systemic risk – insurance industry

* International Financial Services Research, Oct 2009

Systemic risk – insurance industry

Systemic Risk – manage/mitigate?

Systemic risk mitigation measures

Questions?

Appendix: Sources/Reference

increasing share of non-participating business in india – systemic risks associated with it...

Documents