Page 28 - Risk Management in current scenario

Importance of Enterprise Risk

Management in Life Insurance

Sector

T his Paper describes the landscape of Enterprise Risk Management

(ERM) in the countries where Solvency-Il framework is applicable
in the developed market and where the Indian Insurance Market
is currently placed in this regard. The paper further describes the future
of ERM in India and what could be the success factors in its
implementation.

Why Risk Management is required
Risk is present everywhere in all walks of life; this is particularly more
true in the life insurance business which deals in the management of risk
of its policyholder against his/her early death, living longer than
anticipated( longevity risk) or movement of interest rates adversely than
required to be meet his (policyholder's) fixed liability in future.

In this process of managing the risks of policyholders, life companies
themselves expose to these risks. These risks are priced in a form of a
premium; however the adverse variability of actual experience of
parameters such as mortality, lapses, interest rates etc used in the pricing
could leads adverse risk for insurance companies.

It is therefore important to manage these risks so that the losses due
these adverse movements can be minimized. In some market' risk

26 | Risk Management in Current Scenario