IRDA keen on asset, liability panel

The Insurance Regulatory and Development Authority (IRDA) is keen on “insisting” on setting up an asset and liability committee (ALCO) similar to the one 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 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 firms. It would look into all functions of companies, including their investment patterns and ensure there was no asset-liability mismatch.

“The asset management side of the companies need more attention. Perhaps we would require someone to physically verify all 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 apex panel to oversee implementation of the Asset Liability Management (ALM) system, would be headed by a chairman and managing director or an executive director. It would comprise of a 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 the current interest rates and based on the decisions would help future business strategies.

Meanwhile, IRDA is in talks with states to bring their social health insurance schemes under its supervision. States that have implemented the schemes for people living below the poverty line include Andhra Pradesh, Haryana and Tamil Nadu. IRDA member R Kannan said, while the states’ schemes have helped increase penetration of health insurance to 15 per cent, they are not regulated and managed. “There is no single agency to monitor the claim settlement and no proper records maintained for these schemes,” he said, adding the schemes can’t be replicated as there is no case study justifying their success.

In Haryana, the Rashtriya Swasthya Bima Yojana (RSBY) insurance scheme was launched in five districts. The scheme provided smart card-based cashless health insurance cover up to Rs 30,000 to all BPL families for five years. The insurer got a premium of Rs 15 crore from the scheme.

Similarly, Andhra Pradesh introduced insurance cover for people living BPL. So far, the government has insured 65 million people in the state.

The governments of Haryana and Andhra Pradesh awarded their respective schemes to Chennai-based health insurance company Star Health and Allied Insurance Company.

From the Andhra Pradesh government alone, the insurer is getting Rs 350 crore as premia. Recently, Tamil Nadu announced the ‘Chief Minister Kalaignar’s Insurance Scheme for Life Saving Treatments’, which is likely to be launched in June this year. The government has allocated Rs 200 crore towards premium payment for the proposed health insurance scheme, which would cover people living BPL.

Tamil Nadu scheme would enable around 10 million people living under poverty line to receive free specialist treatment up to Rs 1 lakh for 51 life threatening diseases. The premium would be paid by the government itself. Government has invited tenders from the insurance companies to implement this scheme.