Corporate Governance in Insurance

sunandaC

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Corporate Governance in Insurance


Generally, the financial performance of a company depends on its business strategy, Skill-sets of the work force and the soundness of the company’s governance principles.


It is not the same with an insurance company. Insurance is a major investor in the capital markets around the world and insurance company’s earnings and the existence depends on the performance of other companies where they have invested.

Japanese insurance companies have significant portion of their corpus invested in equity the steep fails in the domestic stock prices in the Japanese stock market put investment equity portfolios of many Japanese insurance majors in doldrums.


Hence, insurance industry in addition to creating, maintaining and adhering to its own governance principles, also has the responsibility to vigil over the governance practices of the companies where they have invested.



The IRDA moreover, imposes social obligations such as:

Every life insurer, who undertakes insurance business after the commencement of insurance regulatory authority act, 1999 shall ensure that out of the total policies written in a year, 5% in the first financial year, 7% in the second financial year, 10% in third financial year, 12% in fourth financial year, 15% in fifth year come from rural sector.


Every general insurer must ensure that out of the total policies written in a year, 2% in the first financial year, 3% in the second financial year, 5% thereafter come from the rural sector.


Both the insurers shall ensure that out of the lives in insured in a financial year, 5000 lives in the first financial year, 7500 lives in the second financial year, 10000 lives in the third financial year, 15000 in fourth financial year, 20000 lives in fifth year comes from social sector.



The insurance companies are thus under a tremendous ‘regulatory stifling, while generating the much requirements income to survive the policy holders’ secondly it is anybody guess as to how independent the non-executive directors are in overseeing the risk management process that identifies, measures and priorities business and financial risk, among the insurance companies.
 
Corporate Governance in Insurance


Generally, the financial performance of a company depends on its business strategy, Skill-sets of the work force and the soundness of the company’s governance principles.


It is not the same with an insurance company. Insurance is a major investor in the capital markets around the world and insurance company’s earnings and the existence depends on the performance of other companies where they have invested.

Japanese insurance companies have significant portion of their corpus invested in equity the steep fails in the domestic stock prices in the Japanese stock market put investment equity portfolios of many Japanese insurance majors in doldrums.


Hence, insurance industry in addition to creating, maintaining and adhering to its own governance principles, also has the responsibility to vigil over the governance practices of the companies where they have invested.



The IRDA moreover, imposes social obligations such as:

Every life insurer, who undertakes insurance business after the commencement of insurance regulatory authority act, 1999 shall ensure that out of the total policies written in a year, 5% in the first financial year, 7% in the second financial year, 10% in third financial year, 12% in fourth financial year, 15% in fifth year come from rural sector.


Every general insurer must ensure that out of the total policies written in a year, 2% in the first financial year, 3% in the second financial year, 5% thereafter come from the rural sector.


Both the insurers shall ensure that out of the lives in insured in a financial year, 5000 lives in the first financial year, 7500 lives in the second financial year, 10000 lives in the third financial year, 15000 in fourth financial year, 20000 lives in fifth year comes from social sector.



The insurance companies are thus under a tremendous ‘regulatory stifling, while generating the much requirements income to survive the policy holders’ secondly it is anybody guess as to how independent the non-executive directors are in overseeing the risk management process that identifies, measures and priorities business and financial risk, among the insurance companies.

Hey sunanda, thanks for sharing such a nice information about the corporate governance in insurance sector. Well, i have also got a document which would explain the need of corporate governance in insurance sector.
 

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