Shriram Life Insurance is developing a credit appraisal procedure in order to maintain the quality of its credit portfolio amid falling interest rates and market volatility,
“We are doing quite well in terms of assets under management and overall size of the book. We have focussed very much on the quality of the credit portfolio, and are also developing a credit appraisal procedure so that we scan our portfolio on a regular basis,” said Ajit Banerjee, Chief Investment Officer, Shriram Life Insurance.
Banerjee stressed that capital loss is not acceptable and said the private sector insurer is also working on maintaining its solvency levels. “It makes sense that we set up our portfolio exposure in such a way that you are able to insulate solvency fluctuations to the extent possible within the regulatory parameters available,” he further said.
Life insurance companies have been facing a challenge in terms of ensuring returns for term insurance and guaranteed products, both of which have been witnessing a high demand during the current pandemic and economic downturn.
Banerjee said many insurers are taking exposure in forward rate agreements (FRAs) to protect returns.
“There is a lot of interest to protect the interest rate risk by taking exposures in FRAs,” he said, adding that insurers also have to be efficient in making tactical calls and take positions when yield curves realign.
According to Banerjee, insurers also should build expectations of customers in clear terms. Noting that there is a lot of demand for guaranteed products at present, he said: “Efforts have to be made by insurance companies to meet the policy holders expectation. Policy holders also need to understand that when overall interest rates are headed southwards, they cannot expect something very high from the insurance company,”he said.
