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| Irda keen on setting up asset & liability panel |
| T E Narasimhan / Chennai Mar 26, 2009, 00:19 IST |
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The Insurance Regulatory and Development Authority (Irda) is planning to ‘insist’ on the setting up of an asset and liability committee (ALCO) similar to the one existing in the banking sector after two major insurers reported a combined exposure of Rs 2,300 crore in the beleaguered Satyam Computer Services.
The regulator has said that the companies' assets would have to be measured and managed properly and “we would closely monitor” the firms’ investment portfolios to ensure transparency and timely disclosures to policy holders.
Irda member R Kannan said the asset-liability management may be a hurdle to insurers if there aren’t many long-term and safe investment avenues available.
He said the regulator would be extremely cautious, but would not get into micro management of the insurance companies. It would look into all functions of the companies, including their investment patterns and ensure that there was no asset-liability mismatch.
“The asset management side of the companies needs urgent and more attention, perhaps we would require someone to physically verify all the assets and sign off that the regulations prescribed have been followed and it has to be submitted to the board of directors and would be responsible for compliance,” Kannan added.
ALCO, the top-most panel that would oversee the implementation of Asset Liability Management (ALM) system, would be headed by a chairman and managing director or an executive director. It would comprise CEO, CFO, directors and an appointed actuary.
The committee would consider product pricing, the desired maturity profile of the incremental assets and liabilities in addition to monitoring the risk levels. It will have to articulate current interest rates and based on the decisions would help future business strategies.
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