As a compliance officer, elucidate on the need, relevance and coverage of some ICPs applicable to Indian Insurance Industry.

The need, relevance and coverage of Insurance Core Principles are explained as follows: Stability of insurance sector is fundamental to the growth of financial services industry. Further it sets the base for protection of interests of policyholders and their beneficiaries which is the fundamental mission of any Insurance Regulator. The impact of wide range of social, technological and global economic forces is seen in insurance industry like other financial industry. Insurance supervisory systems and practices must be continually upgraded to cope with these developments. Insurance and other financial sector supervisors and regulators should understand and address financial and systemic stability concerns arising from the insurance sector as they emerge and their interaction with other financial sectors. The nature of insurance activity i.e. covering risks for the economy, financial and corporate undertakings and households, when compared with other financial sectors has both similarities and differences. Insurance, unlike most financial products, is characterised by the reversal of the production cycle in so far as premiums are collected when the contract is entered into and claims arise only if a specified event occurs. Insurers intermediate risks directly. They manage these risks through diversification and risk pooling enhanced by a range of other techniques. In addition to business risks, significant risks to insurers are generated on the liability side of the balance sheet. These risks are referred to as technical risks and relate to the actuarial and/or statistical calculations used in estimating liabilities, and other risks associated with such liabilities. Insurers incur market, credit, liquidity and operational risk from their investments and financial operations, including risks arising from asset-liability mismatches. Life insurers also offer products of life cover with savings content and pension products that are usually managed with a long-term perspective. The regulatory and supervisory system must address all these risks. Finally, the regulatory and supervisory system must address the increasing presence in the market of insurance groups and financial conglomerates, as well as financial convergence. The importance of the insurance sector for financial stability matters has been increasing which has implications for insurance supervision as it requires more focus on a broad set of risks. Supervisors at a jurisdictional and international level must collaborate to ensure that these entities are effectively supervised so that policyholders are protected and financial markets remain stable; to minimise the risk of contagion from one sector or jurisdiction to another; and to reduce supervisory gaps and avoid unnecessary supervisory duplication. Scope and coverage of the Insurance Core Principles The Insurance Core Principles (ICPs) provide a globally accepted framework for the regulation of the insurance sector. The ICP material is presented according to a hierarchy of regulatory or supervisory material. The ICP statements are the highest level in the hierarchy and prescribe the essential elements that must be present in the supervisory regime in order to promote a financially sound insurance sector and provide an adequate level of policyholder protection. The next in hierarchy comes standards that are fundamental to the implementation of ICP statements and then comes guidance material in the hierarchy, which is the lowest level. It provides detail on how to implement an ICP statement or standard. The provisions of ICP as applicable to Indian Insurance industry are: ICP Objectives, Powers and Responsibilities of the Supervisor: The authority (or authorities) responsible for insurance supervision and the objectives of insurance supervision are clearly defined. ICP 2 Supervisor: The supervisor, in the exercise of its functions and powers is operationally independent, accountable and transparent, protects confidential information has appropriate legal protection, has adequate resources and meets high professional standards. ICP 3 Information Exchange and Confidentiality Requirements: The supervisor exchanges information with other relevant supervisors and authorities subject to confidentiality, purpose and use requirements. ICP 4 Licensing: A legal entity which intends to engage in insurance activities must be licensed before it can operate within a jurisdiction. The requirements and procedures for licensing must be clear, objective and public, and be consistently applied. ICP 5 Suitability of Persons: The supervisor requires Board Members, Senior Management, Key Persons in Control Functions and Significant Owners of an insurer to be and remain suitable to fulfil their respective roles. ICP 6 Changes in Control and Portfolio Transfers: Supervisory approval is required for proposals to acquire significant ownership or an interest in an insurer that results in that person (legal or natural), directly or indirectly, alone or with an associate, exercising control over the insurer. The same applies to portfolio transfers or mergers of insurers. ICP 7 Corporate Governance: The supervisor requires insurers to establish and implement a corporate governance framework which provides for sound and prudent management and oversight of the insurer's business and adequately recognises and protects the interests of policyholders. ICP 8 Risk Management and Internal Controls: The supervisor requires an insurer to have, as part of its overall corporate governance framework, effective systems of risk management and internal controls, including effective functions for risk management, compliance, actuarial matters and internal audit. ICP 9 Supervisory Review and Reporting: The supervisor takes a risk-based approach to supervision that uses both off-site monitoring and on-site inspections to examine the business of each insurer, evaluate its condition, risk profile and conduct, the quality and effectiveness of its corporate governance and its compliance with relevant legislation and supervisory requirements. The supervisor obtains the necessary information to conduct effective supervision of insurers and evaluate the insurance market. ICP 10 Preventive and Corrective Measures: The supervisor takes preventive and corrective measures that are timely, suitable and necessary to achieve the objectives of insurance supervision. ICP 11 Enforcement: The supervisor enforces corrective action and, where needed, imposes sanctions based on clear and objective criteria that are publicly disclosed. ICP 12 Winding-up and Exit from the Market: The legislation defines a range of options for the exit of insurance legal entities from the market. It defines insolvency and establishes the criteria and procedure for dealing with insolvency of insurance legal entities. In the event of winding-up proceedings of insurance legal entities, the legal framework gives priority to the protection of policyholders and aims at minimising disruption to the timely provision of benefits to policyholders. ICP 13 Reinsurance and Other Forms of Risk Transfer: The supervisor sets standards for the use of reinsurance and other forms of risk transfer, ensuring that insurers adequately control and transparently report their risk transfer programmes. The supervisor takes into account the nature of reinsurance business when supervising reinsurers based in its jurisdiction. ICP 14 Valuation: The supervisor establishes requirements for the valuation of assets and liabilities for solvency purposes. ICP 15 Investment: The supervisor establishes requirements for solvency purposes on the Investment activities of insurers in order to address the risks faced by insurers. ICP 16 Enterprise Risk Management for Solvency Purposes: The supervisor establishes enterprise risk management requirements for solvency purposes that require insurers to address all relevant and material risks. ICP 17 Capital Adequacy: The supervisor establishes capital adequacy requirements for solvency purposes so that insurers can absorb significant unforeseen losses and to provide for degrees of supervisory intervention. ICP 18 Intermediaries: The supervisor sets and enforces requirements for the conduct of insurance intermediaries, to ensure that they conduct business in a professional and transparent manner. ICP 19 Conduct of Business: The supervisor sets requirements for the conduct of the business of insurance to ensure customers are treated fairly, both before a contract is entered into and through to the point at which all obligations under a contract have been satisfied. ICP 20 Public Disclosure: The supervisor requires insurers to disclose relevant, comprehensive and adequate information on a timely basis in order to give policyholders and market participants a clear view of their business activities, performance and financial position. This is expected to enhance market discipline and understanding of the risks to which an insurer is exposed and the manner in which those risks are managed. ICP 21 Countering Fraud in Insurance: The supervisor requires that insurers and intermediaries take effective measures to deter, prevent, detect, report and remedy fraud in insurance. ICP 22 Anti-money Laundering and Combating the Financing of Terrorism (AML/CFT): The supervisor requires insurers and intermediaries to take effective measures to combat money laundering and the financing of terrorism. In addition, the supervisor takes effective measures to combat money laundering and the financing of terrorism. ICP 23 Group-wide Supervision: The supervisor supervises insurers on a legal entity and group wide basis.