EXECUTIVE SUMMARY

With largest number of life insurance policies in force in the orl!" Insurance happens to be a mega opportunit# in In!ia$ It%s a business gro ing at the rate of &'()* per cent annuall#$ Together ith ban+ing ser,ices" it a!!s about - percent to the countr#%s ./0 $In spite of all this gro th the statistics of the penetration of the insurance in the countr# is ,er# poor$ 1earl# 2* per cent of In!ian population is ithout life insurance co,er hile health insurance an! non(life insurance continues to be belo international stan!ar!s$ An! this part of the population is also sub3ect to ea+ social securit# an! pension s#stems ith har!l# an# ol! age income securit#$ This it(self is an in!icator that gro th potential for the insurance sector is immense$ Incorporate! in &4-ith a share capital of Rs$ &* crores" 5/6C has since emerge! as the largest

resi!ential mortgage finance institution in the countr#$ The corporation has ha! a series of share issues raising its capital to Rs$ &-2 crores$ 5/6C operates through -' locations throughout the countr# ith its Corporate 5ea!7uarters in Mumbai" In!ia$ 5/6C is a professionall# manage! organi8ation ith a boar! of !irectors consisting of eminent persons ho represent ,arious fiel!s inclu!ing finance" ta9ation" construction an! urban polic# : !e,elopment$ The boar! primaril# focuses on strateg# formulation" polic# an! control" !esigne! to !eli,er increasing ,alue to sharehol!ers$ ;i7ui!it# management in,ol,es the abilit# of the compan# to meet the !eman!s of man# polic#<contracthol!ers for cash o,er a short perio!$ Although such an e,ent ma# ne,er occur" it is essential that the cash !eman! be met if it !oes$ .oo! li7ui!it# management re7uires a strategic management plan" possible action plans" an! ongoing anal#sis an! monitoring$ While the focus of this report is stress li7ui!it# ris+ management" all three le,els are important an! interrelate!$ The three le,els of li7ui!it# management shoul! be !esigne! to pro,i!e re7uire! cash at the appropriate time" hile" at the same time" allo ing for in,estment policies that ma9imi8e returns on in,estments$ In or!er to achie,e the proper balance bet een cash a,ailabilit# an! ma9imum return" it is necessar# to e9amine a broa! range of economic scenarios an! stress e,ents$ Stress testing in this report ill be !one ith regar! to the follo ing ris+ shoc+s=

Mar+et ris+= Mar+et ris+ shoc+s gauge the !irect effect of instantaneous shoc+s on balance sheet an!
capital or li7ui!it# ratios$ Mar+et ris+ shoc+s are thus a useful measure for the effects of une9pecte! large shoc+s$ Stress testing for mar+et ris+s in this a# is a generall# accepte! practice in ris+ management an! is performe! at high fre7uenc# >normall# !ail# for certain parts of the tra!ing boo+?$ Mar+et ris+ shoc+s inclu!e the follo ing= Interest rate ris+ Asset 0rice ris+

Insurance Ris+= These ris+s are specific to the insurance in!ustr# an! inclu!e the follo ing=
A permanent increase in the mortalit# rate b# )' @$>This shoc+ is applie! to insure! li,es onl#$? A permanent !ecrease in mortalit# rate b# )' @$>This shoc+ is applie! to annuitants onl#$? An increase in surren!ers b# )' @$ /uring the first part of m# pro3ect" I as gi,en complete classroom training about the ,arious unit lin+e! as ell as the tra!itional plans an! solutions hich the compan# offers$ ;ater"I as gi,en the opportunit# to practicall# be in the or+ space an! un!erstan! ,arious !imensions of the business$Apart from the li7ui!it# anal#sis"I also ha! a chance to mar+et an! sell the pro!ucts$Acti,ities le! to practical e9posure an! taught me the aspects of customer !ealing$ 6inall#" interesting conclusions ere !ra n out of the !ata collecte! regar!ing the li7ui!it# position of 5/6C Stan!ar! ;ife$