Actuarial Society of Nepal makes analysis of possible risks to life insurance companies in Nepal; Covid 19 not to leave insurance sector unharmed
Actuarial Society of Nepal has released a statement outlining the possible setback the life insurance companies in Nepal can face during and after the impact of Covid-19.
As per the statement issued by the association, COVID-19 will have a profound impact not only on individuals and families, but businesses and Nepali economy as a whole. The insurance sector is no exception. The implications for the Nepali insurance industry is going to differ vastly over the short and long-term. However, the financial impact on each insurer will depend on its business model (e.g. classes and mix of business), pricing structure, reinsurance coverage and level of digitalization.
How the company recovers from this Crisis depends on the effectiveness of the business continuity plans, operational agility and the robustness of risk management practices. The speed of the response, and support for the customers during and after the crisis will shape the public perception and trust in the company as well as in insurance industry. Insurers can play a crucial role in reinforcing their social role by providing a cushion against losses and help re-build a resilient society.
Life Insurance Sector: Issues to consider from the potential implication of COVID-19 (Coronavirus)
Some of the key areas that the leaders of insurance companies should be thinking about are:
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Area |
Key considerations |
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Portfolio Management |
Identifying product lines that are exposed to the impact of COVID-19 with regular monitoring and measurement of the portfolio’s exposure. |
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Sensitivity analyses of the profitability of the affected portfolios from the expected change in key risk drivers. |
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Company’s profitability analyses based on scenarios reflecting different business mix and volumes. |
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Impact on future policy wordings and on new business application process. |
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Customer Care |
Premium holiday for impacted policyholders. |
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Treatment of claims arising from COVID-19 (i.e. pandemic claims). If a policyholder develops illness as specified under critical illness rider due to COVID-19, what should be the company’s stance on paying such claims? |
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Implications on underwriting and claims verification process. |
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Actuarial & Risk Management |
Review of the reinsurance treaties on pandemic coverage. |
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Expected change in the level and quantum of key risk drivers and its impact on valuation assumptions over short and long-term. |
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Appropriate and adequate data collection in order to monitor the experience influencing the key assumptions. |
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Regular revision of claim reserves in light of the current circumstances. |
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Impact on bonus distribution policy. |
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Area |
Key considerations |
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Investment & Solvency |
Sensitivity analyses of the balance sheet from the expected changes in investment return. |
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Monitoring and measuring the credit risk exposure from other financial institutions on possible defaults (including credit risk on reinsurance recoveries). |
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Monitoring and measuring liquidity risk exposure over the next 6 to 12 months. |
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Identification of key challenges on solvency ratios. |
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Business Continuity Plans |
Assessment of the effectiveness of the business continuity plans and identification of improvements. |
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Digital |
Creating a more agile, digitally-enabled business, in spite of initial investment constraints. |
Actuarial Society of Nepal
The Actuarial Society of Nepal (“the Society”) is the professional body representing qualified and trainee actuaries and other professionals working in the actuarial field in Nepal. The Society is a non- profit organisation established in 2019.
The society aims to promote and raise awareness of the value that the actuarial profession can bring to the Nepalese insurance industry as well as to the wider financial services sector. Another key objective is to support the members so that in the long run the country can become reliant on its own actuaries.
The Society is currently working towards becoming the Associate Member of the International Actuarial Association (IAA). In the future, it will aim to become the Full Member of the IAA.
Contact Us: If you have any queries or suggestions or want to volunteer, please send your queries to: info@actuariesnepal.org
