MUMBAI, SEPT 26: An advisory group on insurance regulation set up by the Reserve Bank of India, has recommended setting up of a separate pension board like the Occupational Pension Board, as in the UK to regulate the superannuation funds. ``It is necessary to bring these funds under some form of clear regulatory arrangements/mechanisms,'' feels the committee. The Group, headed by Y V Reddy, pointed out that superannuation business comes under the definition of life insurance in India. In the field of specialisation, "life" and "non-life" businesses are to be conducted by separate companies as per the IRDA norms and it would be advisable to place an explicit restriction on the formation of composite companies. ``It may be desirable to take a fresh look at developments in other countries and consider introducing a more elaborate classification of life and non-life insurance business. The minimum capital levels may be fixed for each class of business on a scientific and on a more transparent basis,'' the Group added. It is of the view that the certificate, including the basis of premium given by the actuary may be treated as a public document and be made available, on demand, to other companies and any practising actuary. Further, the premium rate table and the benefit design also be treated as "published information" and a similar procedure could be considered for group business as well as for general insurance business. With a view to enhancing transparency, the regulator may, as a general rule, ascertain the names of the natural and legal persons holding a direct or indirect qualifying participation in the applicant company and more importantly, make this knowledge public while granting the licence, the advisory group said. With regard to suitability of owners, the Group is of the view that the sound reputation of owners may be ensured on a continuous basis. Regarding outsourcing, the Group holds the view that it would be desirable to follow the international practices as also other Indian industrial practices, by considering outsourcing of various functions of an insurance company in view of the economies of scale and scope. The Group stressed on the need for co-ordination between regulators of insurance companies and mutual funds with a view to ensuring uniformity in the design of products, terms and conditions and marketability and also to bring about a level playing field between the two segments of the financial sector. It has recommended that the regulator may make available a recommendatory standard format of articles of incorporation. The Group was of the view that a firm of consulting actuaries may be considered for acting as appointed actuaries as per the practice obtaining in most countries. In the field of reinsurance, the Group feels that the possibility of reinsuring only on risk premium basis may be explored. The Indian prescription of having compulsory cession of risks to local reinsurers may appear to be against the recommendation of the Interational Association of Insurance Supervisors, it said adding, prescription in this regard may be continued till a satisfactory solution was found for the problem of international reinsurers converting local insurance companies into brokers. Since it would take quite some time to develop necessary international contact and build a reliable database on the activities and strengths of various reinsurers, the existing domestic expertise could be nurtured and strengthened for this purpose.
