Mumbai, Feb 27: Credit Analysis and Research Ltd (Care) is all set to enterthe ratings segment for insurance companies. It will provide ratings to lifeand non-life insurance and re-insurance companies, and has already put itsmechanism and methodology in place for rating insurance companies.Said CARE's executive director Rajesh Mokashy: "CARE is well equipped tooffer rating services for insurance companies. It is line with CARE'S policyof offering a wide gamut of rating services, rating insurance companies,therefore, is a natural extension. To this end, we are also in talks with afew insurance companies." He added that in a few years time, ratinginsurance companies would become the norm. CARE has studied the norms ofinternational regulatory bodies like the National Association of InsuranceCommittee (NAIC) and has come up with its own rating criteria. The key areasthat CARE will be looking at for arriving at the claims paying abilityrating are the regulatory framework, industry analysis, business and productprofile, the selling and distribution system, the quality of the managementof the company, flexibility in product pricing, underwriting (estimates ofamounts necessary to cover costs), international operations of the foreignpartners, the investment and loan portfolio-liquidity and loan profile, theextent of reinsurance taken in each line of business and the leverage (theratio of net premiums written to policy holders surplus). The claims payingability of a company is its ability to pay policy claims under the termsindicated and is, therefore, an opinion on the financial strength of thecompany. The opinion is not specific to a particular insurance policy orcontract. The claims paying ability rating does not apply to the non-policyobligations of the insurer, such as debt, nor does it address thesuitability or terms of any individual policy or contract. Non-life insurerscan be referred to as `property-liability' insurers. In India, regulationsprohibit a life insurer to operate in the non-life business and vice-versa.
A non-life policy is often an annual contract. The time span for the purposeof analysing the outlook of the company can be about three years to providefor lag in claims realisation. In a non-life firm, the balance sheet isimportant to assess the company's financial strength.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
