Regulator warns insurance cos against manipulation

Express (July 26, 2011)

The chief of the country's insurance regulatory body Monday said the authority will take tough actions against those companies which have declared dividends without proper valuations.

"We have instances about many insurance companies being involved in manipulations to take undue advantages. We will no more tolerate such gross irregularities in this connection," M. Shefaq Ahmed, chairman of Insurance Regulatory and Development Authority (IDRA) said.

He said the IDRA has already sent two letters to a couple of companies for their alleged involvement in such manipulations.

He said actions must be taken if the companies are found guilty of committing such offences.

Mr. Shefaq, also one of the country's very few actuaries, said insurance companies must take prior permission from the regulatory body while announcing dividends.

He was addressing a seminar on Actuarial Valuation and Product Pricing held at the conference room of the Metropolitan Chamber of Commerce and Industry (MCCI) in the city.

Some 19 participants, mostly managing directors of life insurance companies, joined the seminar.

The IDRA chief, however, said: "The papers or documents concerned of many companies do not carry the real signatures of actuaries. They only attach the scan copies."

Shoaib Soofi, Principal Actuary of Metlife Alico of Middle East presented keynote paper in the seminar.

Mr Shefaq said the insurance companies should appoint actuaries for avoiding risk in the insurance business and ensuring their proper asset management.

An actuary is a business professional who deals with the financial impact of risk and uncertainty. Actuaries provide expert assessments of financial security systems, with a focus on their complexity, their mathematics, and their mechanisms.

He said: "If a single company cannot afford the services of an actuary, two or three companies should jointly hire the services of an actuary."

Mr Shefaq said local companies might hire such services of an actuary from abroad as the country allows non-resident actuaries to do their job.

He said an actuary needs to be paid, at least, US$ 15000 a month for his or her services.

He said there are many students in the country who have completed actuary courses from India or other parts of the world.

"But local companies are not recruiting them or are offering them poor compensation packages."

An apprentice actuary gets Rupees 5000 in India. "Our local companies do not offer more than Tk 10,000."

IDRA members Nurul Islam Mollah, Noba Gapil Banik and Muhammad Ziaulhaq, chairman of Jibon Bima Corporation Muhammad Sohrab Uddin and managing director of Pragati Life Insurance Jafar Halim addressed the seminar.

While presenting keynote paper, Shoaib Soofi said available solvency margin must be at least equal to the required solvency margin.

He said not all assets are counted for solvency purposes and the primary considerations for deciding admissibility of assets, relate to liquidity and security.

He said 100 per cent of assets in the categories of government securities, fixed deposits and cash are admissible.

Mr Soofi said sound pricing, prudent investment, effective claim management, expense control, careful underwriting, proper reinsurance, sound actuarial valuation basis and detailed management and regulatory reporting are some of the key areas where effective actions do need to be taken to help improve solvency and assess the surplus position of insurance companies.