Se ha denunciado esta presentación.
Se está descargando tu SlideShare. ×

Insurance Companies- Accounting and Statutory Requirements -ICICI Lombard

Cargando en…3
×

Eche un vistazo a continuación

1 de 53
1 de 53

Más Contenido Relacionado

Audiolibros relacionados

Gratis con una prueba de 30 días de Scribd

Ver todo

Insurance Companies- Accounting and Statutory Requirements -ICICI Lombard

  1. 1. 1 INTRODUCTION Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount of money to be charged for a certain amount of insurance coverage is called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. Insurance in India refers to the market for insurance in India which covers both the public and private sector organisations. It is listed in the Constitution of India on the in the Seventh Schedule meaning it can only be legislated by the central government. The insurance sector has gone through a number of phases by allowing private companies to solicit insurance and also allowing foreign direct investment. India allowed private companies in insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014. However, the largest life-insurance company in India, Life Insurance Corporation of India is still owned by the government and carries a sovereign guarantee for all insurance policies issued by it.
  2. 2. 2 HISTORY In India, insurance has a deep-rooted history. Insurance in various forms has been mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and Kautilya (Arthashastra). The fundamental basis of the historical reference to insurance in these ancient Indian texts is the same i.e. pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. The early references to Insurance in these texts have reference to marine trade loans and carriers' contracts. Insurance in its current form has its history dating back until 1818, when Oriental Life Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of European community. The pre-independence era in India saw discrimination between the lives of foreigners (English) and Indians with higher premiums being charged for the latter. In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer. At the dawn of the twentieth century, many insurance companies were founded. In the year 1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the premium-rate tables and periodical valuations of companies should be certified by an actuary. However, the disparity still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is the National Insurance Company, which was founded in 1906, and is still in business. The Government of India issued an Ordinance on 19 January 1956 nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. In 1972 with the General Insurance Business (Nationalization) Act was passed by the Indian Parliament, and consequently, General Insurance business was nationalized with effect from 1 January 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on 1 January 1973.
  3. 3. 3 The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. Before that, the industry consisted of only two state insurers: Life Insurers (Life Insurance Corporation of India, LIC) and General Insurers (General Insurance Corporation of India, GIC). GIC had four subsidiary companies. With effect from December 2000, these subsidiaries have been de-linked from the parent company and were set up as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.
  4. 4. 4 LEGAL STRUCTURE The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated. It is governed by a number of acts. The Insurance Act of 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business. Life insurance in India was completely nationalized on 19 January 1956, through the Life Insurance Corporation Act. All 245 insurance companies operating then in the country were merged into one entity, the Life Insurance Corporation of India. The General Insurance Business Act of 1972 was enacted to nationalize about 100 general insurance companies then and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance and United India Insurance, which were headquartered in each of the four metropolitan cities. Until 1999, there were no private insurance companies in India. The government then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies. Furthermore, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies. In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on par with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects and Company Secretaries. A minimum capital of US$80 million (Rs.400 Crore) is required by legislation to set up an insurance business. AUTHORITIES The primary regulator for insurance in India is the Insurance Regulatory and Development Authority (IRDA) which was established in 1999 under the government legislation called the Insurance Regulatory and Development Authority Act, 1999. The industry recognises examinations conducted by IAI (for actuaries), III (for agents, brokers and third-party administrators) and IIISLA (for surveyors and loss assessors). TAC is the sole data repository for the non-life industry. IBAI gives voice for brokers while GI
  5. 5. 5 Council and LI Council are platforms for insurers. AIGIEA, AIIEA, AIIEF, AILICEF, AILIEA, FLICOA, GIEAIA, GIEU and NFIFWI cater to the employees of the insurers. In addition, there are a dozen Ombudsman offices to address client grievances. PRINCIPLES Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be an insurable risk, the risk insured against must meet certain characteristics. Insurance as a financial intermediary is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses. INSURABILITY Risk which can be insured by private companies typically shares seven common characteristics: 1. Large number of similar exposure units: Since insurance operates through pooling resources, the majority of insurance policies are provided for individual members of large classes, allowing insurers to benefit from the law of large numbers in which predicted losses are similar to the actual losses. Exceptions include Lloyd's of London, which is famous for insuring the life or health of actors, sports figures, and other famous individuals. However, all exposures will have particular differences, which may lead to different premium rates. 2. Definite loss: The loss takes place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place, or cause is identifiable. Ideally, the time, place, and cause of a
  6. 6. 6 loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements. 3. Accidental loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks or even purchasing a lottery ticket, are generally not considered insurable. 4. Large loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses, these latter costs may be several times the size of the expected cost of losses. There is hardly any point in paying such costs unless the protection offered has real value to a buyer. 5. Affordable premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, then it is not likely that the insurance will be purchased, even if on offer. Furthermore, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, then the transaction may have the form of insurance, but not the substance (see the U.S. Financial Accounting Standards Board pronouncement number 113: "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts"). 6. Calculable loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim. 7. Limited risk of catastrophically large losses: Insurable losses are ideally independent and non-catastrophic, meaning that the losses do not happen all at once and individual losses are not severe enough to bankrupt the insurer; insurers may prefer to limit their exposure to a loss from a single event to some small portion of their capital base. Capital constrains insurers' ability to sell earthquake insurance as
  7. 7. 7 well as wind insurance in hurricane zones. In the United States, flood risk is insured by the federal government. In commercial fire insurance, it is possible to find single properties whose total exposed value is well in excess of any individual insurer's capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market. LEGAL When a company insures an individual entity, there are basic legal requirements and regulations. Several commonly cited legal principles of insurance include: 1. Indemnity – the insurance company indemnifies, or compensates, the insured in the case of certain losses only up to the insured's interest. 2. Benefit insurance – as it is stated in the study books of The Chartered Insurance Institute, the insurance company doesn't have the right of recovery from the party who caused the injury and is to compensate the Insured regardless of the fact that Insured had already sued the negligent party for the damages (for example, personal accident insurance) 3. Insurable interest – the insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is involved. The concept requires that the insured have a "stake" in the loss or damage to the life or property insured. What that "stake" is will be determined by the kind of insurance involved and the nature of the property ownership or relationship between the persons. The requirement of an insurable interest is what distinguishes insurance from gambling. 4. Utmost good faith – (Uberrima fides) the insured and the insurer are bound by a good faith bond of honesty and fairness. Material facts must be disclosed. 5. Contribution – insurers which have similar obligations to the insured contribute in the indemnification, according to some method. 6. Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the insured; for example, the insurer may sue those liable for the insured's loss. The Insurers can waive their subrogation rights by using the special clauses. 7. Causa proxima, or proximate cause – the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be excluded
  8. 8. 8 8. Mitigation – In case of any loss or casualty, the asset owner must attempt to keep loss to a minimum, as if the asset was not insured. INDEMNIFICATION To "indemnify" means to make whole again, or to be reinstated to the position that one was in, to the extent possible, prior to the happening of a specified event or peril. Accordingly, life insurance is generally not considered to be indemnity insurance, but rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are generally three types of insurance contracts that seek to indemnify an insured: 1. A "reimbursement" policy 2. A "pay on behalf" or "on behalf of" policy 3. An "indemnification" policy From an insured's standpoint, the result is usually the same: the insurer pays the loss and claims expenses. If the Insured has a "reimbursement" policy, the insured can be required to pay for a loss and then be "reimbursed" by the insurance carrier for the loss and out of pocket costs including, with the permission of the insurer, claim expenses. Under a "pay on behalf" policy, the insurance carrier would defend and pay a claim on behalf of the insured who would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language which enables the insurance carrier to manage and control the claim. Under an "indemnification" policy, the insurance carrier can generally either "reimburse" or "pay on behalf of", whichever is more beneficial to it and the insured in the claim handling process. An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance policy. Generally, an insurance contract includes, at a minimum, the following elements: identification of participating parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event
  9. 9. 9 covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss covered in the policy. When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a claim against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the premium. Insurance premiums from many insured’s are used to fund accounts reserved for later payment of claims – in theory for a relatively few claimants – and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (called reserves), the remaining margin is an insurer's profit.
  10. 10. 10 TYPES OF INSURANCE Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, vehicle insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). A home insurance policy in the United States typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property. Business insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the business owner's policy (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the coverages that a homeowner needs. AUTO INSURANCE Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision. Coverage typically includes:  Property coverage, for damage to or theft of the car  Liability coverage, for the legal responsibility to others for bodily injury or property damage  Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses
  11. 11. 11 HEALTH INSURANCE Health insurance policies cover the cost of medical treatments. Dental insurance, like medical insurance, protects policyholders for dental costs. In most developed countries, all citizens receive some health coverage from their governments, paid for by taxation. In most countries, health insurance is often part of an employer's benefits. ACCIDENT, SICKNESS, AND UNEMPLOYMENT INSURANCE Workers' compensation, or employers' liability insurance, is compulsory in some countries  Disability insurance policies provide financial support in the event of the policyholder becoming unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgage loans and credit cards. Short-term and long-term disability policies are available to individuals, but considering the expense, long-term policies are generally obtained only by those with at least six- figure incomes, such as doctors, lawyers, etc. Short-term disability insurance covers a person for a period typically up to six months, paying a stipend each month to cover medical bills and other necessities.  Long-term disability insurance covers an individual's expenses for the long term, up until such time as they are considered permanently disabled and thereafter. Insurance companies will often try to encourage the person back into employment in preference to and before declaring them unable to work at all and therefore totally disabled.  Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work.  Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.  Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury.
  12. 12. 12 CASUALTY Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as auto, workers compensation, and some liability insurances.  Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.  Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions could result in a loss. LIFE Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. In most states, a person cannot purchase a policy on another person without their knowledge. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance. Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed. In many countries, such as the United States and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of
  13. 13. 13 life insurance as a tax-efficient method of saving as well as protection in the event of early death. In the United States, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. PROPERTY This tornado damage to an Illinois home would be considered an "Act of God" for insurance purposes Property insurance provides protection against risks to property, such as fire, theft or weather damage. This may include specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance. The term property insurance may, like casualty insurance, be used as a broad category of various subtypes of insurance, some of which are listed below: US Airways Flight 1549 was written off after ditching into the Hudson River  Aviation insurance protects aircraft hulls and spares, and associated liability risks, such as passenger and third-party liability. Airports may also appear under this subcategory, including air traffic control and refuelling operations for international airports through to smaller domestic exposures.  Boiler insurance (also known as boiler and machinery insurance, or equipment breakdown insurance) insures against accidental physical damage to boilers, equipment or machinery.  Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage arising from any cause (including the negligence of the insured) not otherwise expressly excluded. Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures and/or equipment
  14. 14. 14 being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from an insured peril.  Crop insurance may be purchased by farmers to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease.  Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary home insurance policies do not cover earthquake damage. Earthquake insurance policies generally feature a high deductible. Rates depend on location and hence the likelihood of an earthquake, as well as the construction of the home.  Fidelity bond is a form of casualty insurance that covers policyholders for losses incurred as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees. Hurricane Katrina caused over $80 billion of storm and flood damage  Flood insurance protects against property loss due to flooding. Many U.S. insurers do not provide flood insurance in some parts of the country. In response to this, the federal government created the National Flood Insurance Program which serves as the insurer of last resort.  Home insurance, also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), provides coverage for damage or destruction of the policyholder's home. In some geographical areas, the policy may exclude certain types of risks, such as flood or earthquake that require additional coverage. Maintenance-related issues are typically the homeowner's responsibility. The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing. In some countries, insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household, including pets.  Landlord insurance covers residential and commercial properties which are rented to others. Most homeowners' insurance covers only owner-occupied homes.  Marine insurance and marine cargo insurance cover the loss or damage of vessels at sea or on inland waterways, and of cargo in transit, regardless of the method of transit. When the owner of the cargo and the carrier are separate corporations, marine cargo
  15. 15. 15 insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.  Supplemental natural disaster insurance covers specified expenses after a natural disaster renders the policyholder's home uninhabitable. Periodic payments are made directly to the insured until the home is rebuilt or a specified time period has elapsed.  Surety bond insurance is a three-party insurance guaranteeing the performance of the principal. The demand for terrorism insurance surged after 9/11  Terrorism insurance provides protection against any loss or damage caused by terrorist activities. In the United States in the wake of 9/11, the Terrorism Risk Insurance Act 2002 (TRIA) set up a federal program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism. The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act 2007 (TRIPRA).  Volcano insurance is a specialized insurance protecting against damage arising specifically from volcanic eruptions.  Windstorm insurance is an insurance covering the damage that can be caused by wind events such as hurricanes..
  16. 16. 16 INSURANCE ACT, 1938 SEPARATION OF ACCOUNTS AND FUNDS 10. (1) Where the insurer carries on business of more than one of the following classes, namely, life insurance, fire insurance, marine insurance or miscellaneous insurance, he shall keep a separate account of all receipts and payments in respect of each such class of insurances business and where the insurer carries on business of miscellaneous insurance whether alone or in conjunction with business of another class, he shall, unless the Authority waives this requirement in writing, keep a separate account of all receipts and payments in respect of each of such sub-classes of miscellaneous insurance business as may be prescribed in this behalf: Provided that no sub-class of miscellaneous insurance business shall be prescribed under this sub-section if the insurance business comprised in the sub-clause consist of insurance contracts which are terminable by the insurer at intervals not exceeding twelve months and under which, if a claim arises, the insurer's liability to pay benefit ceases within one year of the date on which the claim arose. (2) Where the insurer carries on the business of life insurance all receipts due in respect of such business, shall be carried to and shall form a separate tuna to be called the life insurance fund the assets of which shall, after the expiry of six months from the commencement of the Insurance (Amendment) Act, 1946 (6 of 1946), be kept distinct and separate from all other assets of the insurer and the deposit made by the insurer in respect of life insurance business shall be deemed to be part of the assets of such fund; and every insurer shall, within the time limited in sub-section (1) of section 15 in regard to the furnishing of the statements and accounts referred to in section 11, furnish to the Authority a statement showing in detail such assets as at the close of every calendar year duly certified by an auditor or by a person qualified to audit under the law of the insurer's country: Provided that such statement shall, in the case of an insurer to whom section 11 applies, be set out as a part of the balance-sheet mentioned in clause (a) of sub-section (1) of that section: Provided further that an insurer may show in such statement all the assets held in his life department, but at the same time showing any deductions on account of general reserves and other liabilities of that department:
  17. 17. 17 Provided also that the Authority may call for a statement similarly certified of such assets as at any other date specified by him to be furnished within a period of three months from the date with reference to which the statement is called for (2A) No insurer carrying on life insurance business shall be entitled to be registered for any class of insurance business in addition to the class or classes for which he has been already registered unless the Authority is satisfied that the assets of the life insurance fund of the insurer are adequate to meet all his liabilities on policies of life insurance maturing for payment. (3) The life insurance fund shall be as absolutely the security of the life policy-holders as though it belonged to an insurer carrying on no other business than life insurance business and shall not be liable for any contracts of the insurer for which it would not have been liable had the business of the insurer been only that of life insurance and shall not be applied directly or indirectly for any purposes other than those of the life insurance business of the insurer. ACCOUNTS AND BALANCE-SHEET 11. (1) Every insurer, in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in India, shall at the expiration of each financial year prepare with reference to that year,— (a) in accordance with regulations contained in part I of the First Schedule, a balance-sheet in the form set forth in Part II of that Schedule; (b) in accordance with the regulations contained in part I of the Second Schedule, a profit and loss account in the forms set forth in Part II of that Schedule, except where the insurer carries on business of one class only of the following classes, namely, life insurance, fire insurance or marine insurance and no other business; (c) in respect of each class or sub-class of insurance business for which he is required under sub-section (1) of section 10 to keep a separate account of receipts and payments, a revenue account in accordance with the Regulations, and in the form or forms, set forth in the Third Schedule applicable to that class or sub-class of insurance business. (1A) Notwithstanding anything contained in sub-section (1), every insurer, on or after the commencement of the Insurance Regulatory and Development Authority Act,1999, in respect of insurance business transacted by him and in respect of his shareholders’ funds, shall, at the expiration of each financial year, prepare with reference to that year, a balance-sheet, a profit
  18. 18. 18 and loss account, a separate account of receipts and payments, a revenue account in accordance with the regulations made by the Authority. (1B) Every insurer shall keep separate accounts relating to funds of shareholders and policy- holders. (2) Unless the insurer is a company, as defined in clause (2) of sub-section (1) of Section 2 of the Indian Companies Act, 1913 (7 of 1913), the accounts and statements referred to in sub- section (1) shall be signed by the insurer, or in the case of a company by the chairman, if any, and two directors and the principal officer of the company, or in the case of a firm by two partners of the firm, and shall be accompanied by a statement containing the names, descriptions and occupations of, and the directorships held by, the persons in charge of the management of business during the period to which such accounts and statements refer and by a report on the affairs of the business during that period. (3) Where an insurer carrying on the business of insurance at the commencement of this Act has prepared the balance-sheet and accounts required by the Indian Life Assurance Companies Act, 1912 (6 of 1912), or has based his accounts upon the financial and not the calendar year, the provisions of this section shall, if the Central Government so directs in any case, apply until the 31st day of December, 1939, as if in sub-section (1) references to the calendar year were references to the financial year. AUDIT 12. The balance-sheet, profit and loss account, revenue account and profit and loss appropriation account of every insurer, in the case of an insurer specified in sub-clause (a)(ii) or sub-clause (b) of clause (9)of section 2 in respect of all insurance business transacted by him, and in the case of any other insurer in respect of the insurance business transacted by him in India, shall, unless they are subject to audit under the Indian Companies Act, 1913 (7 of 1913), be audited annually by an auditor, and the auditor shall in the audit of all such accounts have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies by section 145 of the Indian Companies Act, 1913. REGISTER OF POLICIES AND REGISTER OF CLAIMS 14. Every insurer, in the case of an insurer specified in sub-clause (a)(ii) or sub-clause (b) of clause (9) of section 2 in respect of all business transacted by him, and in the case of any
  19. 19. 19 other insurer in respect of the insurance business transacted by him in India, shall maintain- (a) a register or record of policies, in which shall be entered, in respect of every policy issued by the insurer, the name and address of the policy-holder, the date when the policy was effected and a record of any transfer, assignment or nomination of which the insurer has notice, and (b) a register or record of claims, in which shall be entered every claim made together with the date of the claim, the name and address of the claimant and the date on which the claim was discharged, or, in the case of a claim which is rejected, the date of rejection and the grounds there for. INVESTMENT OF ASSETS 27. (1) Every insurer shall invest and at all times keep invested assets equivalent to not less than the sum of- (a) the amount of his liabilities to holders of life insurance policies in India on account of matured claims, and (b) the amount required to meet the liability on policies of life insurance maturing for payment in India, less- (i) the amount of premiums which have fallen due to the insurer on such policies but have not been paid and the days of grace for payment of which have not expired, and (ii) any amount due to the insurer for loans granted on and within the surrender values of policies of life insurance maturing for payment in India issued by him or by an insurer whose business he has acquired and in respect of which he has assumed liability, in the manner following, namely, twenty-five per cent of the said sum in Government securities, a further sum equal to not less than twenty-five per cent of the said sum in Government securities or other approved securities and the balance in any of the approved investments specified in sub-section (1) of section 27A or, subject to the limitations, conditions and restrictions specified in sub-section (2) of that section, in any over investment. (2) For the purposes of subsection (1),— (a) the amount of any deposit made under section 7 or section 98 by the insurer in respect of his life insurance business shall be deemed to be assets invested or kept invested Government securities; (b) the securities of, or guaranteed as to principal and interest by, the Government of the United Kingdom shall be regarded as approved securities other than Government securities for a period of four years from the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), in the manner and to the extent herein after specified, namely:— (i) During the first year, to the extent of twenty-five per cent in value of the sum referred to in sub-section (1);
  20. 20. 20 (ii) During the second year, to the extent of eighteen and three fourths per cent in value of the said sum; (iii) During the third year, to the extent of twelve and a half per cent in value of the said sum; and (iv) During the fourth year, to the extent of six and a quarter per cent in value of the said sum: Provided that, if the Authority so directs in any case, the securities specified in clause (b) shall be regarded as approved securities other than Government securities for a longer period than four years, but not exceeding six years in all and the manner in which and the extent to which the securities shall be so regarded shall be as specified in the direction; (c) Any prescribed assets shall, subject to such conditions, if any, as may be prescribed, be deemed to be assets invested or kept invested in approved investments specified in sub- section (1) of section 27A. (3) In computing the assets referred to in subsection (1),— (a) any investment made with reference to any currency other than the Indian rupee which is in excess of the amount required to meet the liabilities of the insurer in India with reference to that currency, to the extent of such excess; and (b) Any investment made in the purchase of any immoveable property outside India or on the security of any such property, shall not be taken into account: Provided that nothing contained in this sub-section shall affect the operation of sub-section (2): Provided further that the Authority may, either generally or in any particular case, direct that any investment, whether made before or after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), and whether made in or outside India, shall, subject to such conditions as may be imposed, be taken into account, in such manner as may be specified in computing the assets referred to in sub-section (1) and where any direction has been issued under this proviso copies thereof shall be laid before Parliament as soon as may be after it is issued. (4) Where an insurer has accepted reassurance in respect of any policies of life insurance issued by another insurer and maturing for payment in India or has ceded reassurance to another insurer in respect of any such policies issued by himself, the sum referred to in subsection (1) shall be increased by the amount of the liability involved in such acceptance and decreased by the amount of the liability involved in such cession. (5) The Government securities and other approved securities in which assets are under sub- section (1) to be invested and kept invested shall be held by the insurer free of any encumbrance, charge, hypothecation or lien.
  21. 21. 21 (6) The assets required by this section to be held invested by an insurer incorporated or domiciled outside India shall, except to the extent of any part thereof which consists of foreign assets held outside India, be held in India and all such assets shall be held in trust for the discharge of the liabilities of the nature referred to in sub-section (1) and shall be vested in trustees resident in India and approved by the Authority, and the instrument of trust under this sub-section shall be executed by the insurer with the approval of the Authority and shall define the manner in which alone the subject-matter of the trust shall be dealt with. Explanation.—this sub-section shall apply to an insurer incorporated India whose share capital to the extent of one-third is owned by, or the members of whose governing body to the extent of one-third consists of, members domiciled elsewhere than in India. FURTHER PROVISIONS REGARDING INVESTMENTS. 27-B. (1) No insurer carrying on general insurance business shall, after the commencement of the Insurance (Amendment) Act, 1968 (62 of 1968), invest or keep invested any part of his asset otherwise than in any of the following approved investments, namely: (a) The investment specified in clauses (a) to (e), (n), (q) and (r) of sub-section (1) of Sec.27A; (b) debentures secured by a first charge on any immoveable property, plant or equipment of any company which has paid interest in full for the three years immediately preceding or for at least three out of the four or five years immediately preceding on such or similar debentures issued by it; (c) debentures secured by a first charge on any immoveable property, plant or equipment of any company where either the book value or the market value, whichever is less, of such property, plant or equipment is more than twice the value of such debentures; (d) first debentures secured by a floating charge on all its assets or by a fixed charge on fixed assets and floating charge on all other assets of any company which has paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding the date of the investment; (e) preference shares of any company which has paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding; (f) preference shares of any company on which dividends have been paid for the three years immediately preceding or for at least three out of the four or five years immediately
  22. 22. 22 preceding and which have priority in payment over all the equity shares of the company in winding up; (g) shares of any company which have been guaranteed by another company, such other company having paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding: Provided that the total amount of shares of all the companies under - that guarantee by the guaranteeing company is not in excess of fifty percent. of the paid-up amount of preference and equity shares of the guaranteeing company; (h) shares of any company on which dividends of not less than four per cent including bonus have been paid for the three years immediately preceding or for at least three out of the four or five years immediately preceding; (i) First mortgages on immoveable proper situated in India or in any other country where the insurer is carrying on insurance business: Provided that the property mortgaged is not lease-hold property with an outstanding term of less than fifteen years and the value of the property exceeds by one-third, or if it consists of buildings, exceeds by on-half, the mortgage money; (j) Such other investments as the Authority may, by notification in the Official Gazette, declare to be approved investments for the purposes of this section. PROHIBITION OF PAYMENT BY WAY OF COMMISSION OR OTHERWISE FOR PROCURING BUSINESS 40. (1) No person shall after the expiry of six months from the commencement of this Act, pay or contract to pay any remuneration or reward whether by way of commission or otherwise for soliciting or procuring insurance business in India to any person except an insurance agent or an intermediary or insurance intermediary. (1A) In this section and section 40A, 41 and 43 references to an insurance agent shell be construed as including references to an individual soliciting or procuring insurance business exclusively in the territories which Immediately before the 1st November, 1956 were comprised in a Part B State notified in this behalf by the Central Government in the Official Gazette and holding a valid licence as an insurance agent under the law of that Part B State. (2) No insurance agent shall be paid or contract to be paid by way of commission or as remuneration in any form an amount exceeding, in the case of life insurance business, forty per cent of the first year’s premium payable on any policy or policies effected through him
  23. 23. 23 and five per cent of a renewal premium, payable on such a policy, or, in the case of business of any other class, fifteen per cent of the premium: Provided that insurers in respect of life insurance business only may pay during the first ten years of their business to their insurance agents fifty-five per cent of the first years premium payable on any policy or policies effected through them and six per cent of the renewal premiums payable on such policies: Provided further that nothing in this sub-section shall apply in respect of any policy of life insurance issued after the 31st day of December, 1950, or in respect of any policy of general insurance issued after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950). (2A) Save as hereinafter provided, no insurance agent or intermediary or insurance intermediary shall be paid or contract to be paid by way of commission or as remuneration in any form any amount in respect of any policy not effected through him: Provided that where a policy of life insurance has lapsed and it cannot under the terms and conditions applicable to it be revived without further medical examination of the person whose life was insured thereby, an insurer, after giving by notice in writing to the insurance agent through whom the policy was effected if such agent continues to be an agent of the insist an opportunity to effect the revival of the policy within a time specified in the notice, being not less than one month from the date of the receipt by him of the notice, may pay to another insurance agent who effects the revival of the policy an amount calculated at a rate not exceeding half the rate of commission at which the agent through whom the policy was effected would have been paid had the policy not lapsed, on the sum payable on revival of the policy on account of arrear premiums (excluding any interest on such arrear premiums) and also on the subsequent renewal premiums payable on the policy. (3) Nothing in this section shall prevent the payment under any contract existing prior to the 27th day of January, 1937, of gratuities or renewal commission to Many person, whether an insurance agent within the meaning of this Act or not, or to his representatives after his decease in respect of insurance business effected through him before the said date.
  24. 24. 24 IRDA REGULATIONS FOR FINANCIAL STATEMENTS The Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002, provides that- 1) An insurer carrying on life insurance business shall comply with the requirements of Schedule A. 2) An insurer carrying on general insurance business shall comply with the requirements of Schedule B. This sub-regulation shall apply, mutandis, to reinsurers, until separate regulations are made. 3) The report of the auditors on financial statements of every insurer and reinsurer shall be in conformity with the requirements of Schedule C, or as near thereto as the circumstances permit.
  25. 25. 25 GENERAL INSURANCE General insurance or non-life insurance policies, including automobile and homeowners policies provide payments depending on the loss from a particular financial event. General insurance is typically defined as any insurance that is not determined to be life insurance. It is called property and casualty insurance in the U.S. and Canada and Non-Life Insurance in Continental Europe. TYPES OF GENERAL INSURANCE PERSONAL INSURANCE Personal insurance is essentially a plan availed by and individual to take care of various requirements like health and coverage against death or injury by accident. there are several policies nowadays where there is an option to cover the family members in and individual policy. The different types of personal insurance may be mentioned as well: MEDICAL INSURANCE Medical or health insurance is taken to cover against the chances of medical costs. These plans are created with the estimates of healthcare expenses a person may face in future and the premiums are determined on such approximations. ACCIDENTAL INSURANCE The accidental insurance policies cover both death and any sort of disability arising from an accident. These plans cover a wide range of situations but not ones arising from using alcohol or drugs. PROPERTY INSURANCE Property insurance provides coverage against risks to property arising from fire, weather damage, or theft to name a few. this type of insurance can be further sub divided into fire insurance, earthquake insurance, flood insurance, and boiler insurance for example. The standard fire and special perils, policy of SBI General Insurance is one of the major examples of such a policy.
  26. 26. 26 FIRE INSURANCE Insurance that is used to cover damage to a property caused by fire. Fire insurance is a specialized form of insurance beyond property insurance, and is designed to cover the cost of replacement, reconstruction or repair beyond what is covered by the property insurance policy. Policies cover damage to the building itself, and may also cover damage to nearby structures, personal property and expenses associated with not being able to live in or use the property if it is damaged Homeowners and property owners may consider fire insurance in addition to a property insurance policy if the property contains valuable items. A best practice would be to document the property and its related contents, which makes identifying the value of items damaged or lost much easier after a fire has taken place. A fire insurance policy may contain exclusions based on the cause of the fire, such as not covering fires caused by wars. VEHICLE INSURANCE Vehicle insurance is also referred to as auto insurance, car insurance, GAP insurance, and motor insurance. It is primarily bought for securing road vehicles such as cars, motorcycles, and trucks from physical damage from traffic accidents as well as any liability that may rise thereafter. RURAL INSURANCE Rural insurance is meant to cater to the requirements of rurally bases business or individuals. These policies provide a wide range of coverage starting from life and health to protection against natural disasters that can have a negative effect on business. INDUSTRIAL INSURANCE The insurance policies are availed by various companies to get protection for important projects, contracts, and equipment from situations like fire, theft and any form of damage or loss. COMMERCIAL INSURANCE Commercial insurance is availed in order to get security against theft, liability, and property damage. These plans help in cases of employee injuries and business interruption.
  27. 27. 27 MARINE INSURANCE Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination. Cargo insurance — discussed here — is a sub-branch of marine insurance, though Marine also includes Onshore and Offshore exposed property, (container terminals, ports, oil platforms, pipelines), Hull, Marine Casualty, and Marine Liability. When goods are transported by mail or courier, shipping insurance is used instead. Specialist policies Various specialist policies exist, including:  New building risks: This covers the risk of damage to the hull while it is under construction.  Open Cargo or Shipper’s Interest Insurance: This policy may be purchased by a carrier, freight broker, or shipper, as coverage for the shipper’s goods. In the event of loss or damage, this type of insurance will pay for the true value of the shipment, rather than only the legal amount that the carrier is liable for.  Yacht Insurance: Insurance of pleasure craft is generally known as "yacht insurance" and includes liability coverage. Smaller vessels such as yachts and fishing vessels are typically underwritten on a "binding authority" or "line slip" basis.  War risks: General Hull insurance does not cover the risks of a vessel sailing into a war zone. A typical example is the risk to a tanker sailing in the Persian Gulf during the Gulf War. The war risks areas are established by the London-based Joint War Committee, which has recently moved to include the Malacca Straits as a war risks area due to piracy. If an attack is classified as a "riot" then it would be covered by war-risk insurers.  Increased Value (IV): Increased Value cover protects the ship owner against any difference between the insured value of the vessel and the market value of the vessel.  Overdue insurance: This is a form of insurance now largely obsolete due to advances in communications. It was an early form of reinsurance and was bought by an insurer when a ship was late at arriving at her destination port and there was a risk that she might have been lost (but, equally, might simply have been delayed). The overdue insurance of the Titanic was famously underwritten on the doorstep of Lloyd's.
  28. 28. 28  Cargo insurance: Cargo insurance is underwritten on the Institute Cargo Clauses, with coverage on an A, B, or C basis, A having the widest cover and C the most restricted. Valuable cargo is known as specie. Institute Clauses also exist for the insurance of specific types of cargo, such as frozen food, frozen meat, and particular commodities such as bulk oil, coal, and jute. Often these insurance conditions are developed for a specific group as is the case with the Institute Federation of Oils, Seeds and Fats Associations (FOFSA) Trades Clauses which have been agreed with the Federation of Oils, Seeds and Fats Associations and Institute Commodity Trades Clauses which are used for the insurance of shipments of cocoa, coffee, cotton, fats and oils, hides and skins, metals, oil seeds, refined sugar, and tea and have been agreed with the Federation of Commodity Associations.
  29. 29. 29 ICICI LOMBARD ICICI Lombard General Insurance Company Limited is a joint venture between ICICI Bank Limited, India's second largest bank with total assets of over USD 99 billion at 31 March 2014 and Fairfax Financial Holdings Limited, a Canada based USD 37 billion diversified financial services company engaged in general insurance, reinsurance, insurance claims management and investment management. ICICI Lombard GIC Ltd. is the largest private sector general insurance company in India with a Gross Written Premium (GWP) of Rs 71.34 billion for the year ended 31 March 2014. The firm offers policy issuance and renewal through its website. It markets assurance products including Car Insurance, Health Insurance, International Travel Insurance, Overseas Student Travel Insurance, Two Wheeler Insurance, and Home Insurance. ICICI Lombard has 221 branches spread across the nation. ICICI Lombard is a 74:26 joint venture between ICICI Bank Limited, India's second largest bank with USD 99 billion in assets and Fairfax Financial Holdings Limited, a Canada based USD 37 billion diversified financial services company engaged in general insurance, reinsurance, insurance claims management and investment management. HISTORY Established in 2001, ICICI Lombard General Insurance Company is a joint venture between ICICI Bank- India’s largest private bank and Fairfax financial Holdings Limited- financial Services Company based in Toronto. ICICI bank has 74% stake in the venture while Fairfax has the rest in the venture. ICICI Lombard General Insurance is the largest private sector general insurance company in India and has been accredited with iAAA rating by ICRA for four years (2006, 2007, 2008, and 2010). PRODUCT AND SERVICES  ICIC Lombard Health Insurance  ICICI Lombard Overseas Student Medical Insurance  International Travel insurance  ICICI Lombard Home Insurance  ICICI Lombard Car Insurance
  30. 30. 30 AWARDS ICICI Lombard received the highest rating in terms of overall customer satisfaction as well as ‘The Most Recommended Company’ in a 2013 survey to assess Customer satisfaction and Quality of Health insurance in India, commissioned by Dept. of Consumer Affairs, Ministry of Consumer Affairs. The company has also been conferred the "ASTD BEST Award 2012" for Learning and Development, "Porter Prize 2012" for creating Shared Value, "Golden Peacock Award 2012" for Corporate Social Responsibility and "Golden Peacock Innovation Award-2010" for Rashtriya Swasthya Bima Yojana. It also received the "Product of the Year" award in the General Insurance category for FY 2012-13 and was voted the No 1 Health Insurance Product in a survey of 18,000 people over 23 cities in India, a study done by Nielsen. The company has been conferred with 'Celent Asia Insurance Technology Award 2012' under the category Best Mobile Applications. Claims Leader - General Insurance – Fintelekt - June 2014
  31. 31. 31 FINANCIAL STATEMENTS Balance SheetatMarch31, 2014 (`in000’s) Particulars schedules AtMarch31,2014 At March 31,2013 Sources of funds Share capital 5 4,450,555 4,370,152 Reserves and Surplus 6 19,360,366 14,216,414 Share application money-pending allotment 3,069 1,004,353 Fair value change account (Refernote5.2.17(B)) 1,134,613 690,462 Borrowings 7 - - Total 24,948,603 20,281,381 Application of funds Investments 8 93,089,768 78,125,187 Loans 9 - - Fixed assets 10 3,894,946 4,004,329 Deferred tax asset (Refernote5.2.16) 413,896 502,710 Current assets Cash and bank balances 11 1,619,661 2,696,152 Advances and other assets 12 36,430,522 33,358,591 Sub-Total(A) 38,050,183 36,054,743 Current liabilities 13 87,277,592 77,459,950 Provisions 14 23,222,598 21,874,638 Sub-Total(B) 110,500,190 99,334,588 Net current assets(C)=(A-B) (72,450,007) (63,279,845) Miscellaneous expenditure(to the extent not written off or adjusted) 15 - - Debit balance in profit and loss a/c - 929,000 Total 24,948,603 20,281,381 Significant accounting policies and notes to accounts 16
  32. 32. 32 Profit and Loss Account for the year ended March31, 2014 (`in000’s) Particulars Year ended March 31,2014 Year ended March 31,2013 1.Operatingprofit/(loss) (a)Fire Insurance 485,376 (37,439) (b)Marine Insurance (417,207) (207,858) (c)Miscellaneous Insurance 4,206,570 2,966,385 2.Incomefrominvestments (a)Interest/Dividend & Rent–Gross 1,129,758 1,004,751 (b)Profit on sale/redemption of investments 340,515 150,991 Less: Loss on sale/redemption of investments (101,841) (38,588) 3.Other income (a)Interest income on tax refund 49,799 9,159 (b) Profit on sale/discard of fixed assets 1,372 14,336 (c)Recovery of bad debts written off 23,419 - Total(A) 5,717,761 3,861,737 4.Provisions(Other than taxation) (a)For diminution in the value of investments 85,291 21,090 (b)For doubtful debts (161,042) 541,920 (c)For future recoverable under reinsurance contracts (122,412) 235,277 5.Other expenses (a)Expenses other than those related to Insurance Business (i)Employees’ remuneration and other expenses 10,080 9,736 (ii)Managerial remuneration 41,324 16,073 (iii)Directors’ fees 600 692 (b)Bad debts written off 637,026 196,681 (c)Loss on sale/discard of fixed assets 24,021 23,504 (d)Penalty (Refernote5.1.14(1)) 500 - Total(B) 515,388 1,044,973 Profit/(Loss)before tax 5,202,373 2,816,764 Provision for taxation: (a)Current tax/MAT payable 892,765 582,004 Less: MAT credit entitlement (892,765) (582,004) (b) Deferred tax(Income)/Expense(Refernote5.2.16) Profit/(Loss)after tax 88,814 88,814 (240,989) (240,989) 3,057,7535,113,559 Appropriations Balance of Profit/(Loss) brought forward from last year (929,000) (3,986,753) Balance carried forward to Balance sheet 4,184,559 (929,000) Basic earnings per share of 10 face value `11.50 `7.00 Diluted earnings per share of 10 face value `11.38 `6.91 CORPORATEOVERVIEW
  33. 33. 33 Revenue Accounts for the yearended March31, 2014 Particulars Fire 2013-14 2012-13 1.Premium earned (net) 1 1,534,949 1,385,410 2.Profit on sale/redemption of investments 42,676 16,471 Less: Loss on sale/redemption of investments (12,952) (4,209) 3.Others Foreign exchange gain/(loss) 804 (6,828) Investment income from pool (Terrorism) 145,181 117,109 4.Interest, Dividend & Rent–Gross (Refernote5.2.5) 142,140 97,368 Total(A) 1,852,798 1,605,321 1.Claims Incurred (net) 2 1,027,287 968,594 2.Commission (net) 3 (95,213) 36,383 3.Operating expenses related to insurance business (ReferNote5.2.17(A)) 4 435,348 637,783 4.Premium deficiency - - Total(B) 1,367,422 1,642,760 Operating Profit/(Loss) C=(A-B) 485,376 (37,439) APPROPRIATIONS Transfer to Shareholders’ Account 485,376 (37,439) Transfer to Catastrophe Reserve - - Transfer to Other Reserves - - Total(C) 485,376 (37,439) Significant accounting policies and notes to accounts 16
  34. 34. 34 (` in000’s) Marine Miscellaneous Total 2013-14 2012-13 2013-14 2012-13 2013-14 2012-13 1,566,095 882,274 40,428,089 37,824,831 43,529,133 40,092,515 32,396 11,234 1,672,660 744,425 1,747,732 772,130 (9,832) (2,871) (507,634) (190,251) (530,418) (197,331) (2,893) (1,679) 19,510 617 17,421 (7,890) - - 33,353 23,523 178,534 140,632 107,901 66,409 5,126,191 3,895,635 5,376,232 4,059,412 1,693,667 955,367 46,772,169 42,298,780 50,318,634 44,859,468 1,526,326 744,148 33,635,438 32,093,447 36,189,051 33,806,189 164,307 56,171 (2,359,979) (1,923,736) (2,290,885) (1,831,182) 420,241 380,206 11,290,140 9,162,684 12,145,729 10,180,673 - (17,300) - - - (17,300) 2,110,874 1,163,225 42,565,599 39,332,395 46,043,895 42,138,380 (417,207) (207,858) 4,206,570 2,966,385 4,274,739 2,721,088 (417,207) (207,858) 4,206,570 2,966,385 4,274,739 2,721,088 - - - - - - - - - - - - (417,207) (207,858) 4,206,570 2,966,385 4,274,739 2,721,088
  35. 35. 35 Schedules forming part of the financial statements Schedule–1 Premium Earned (net) Fire Marine Marine- Cargo Marine- Others Marine- Total Motor-OD Motor-TP Motor- Total 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 Premium from direct business written-net of service tax 4,870,154 1,900,250 617,367 2,517,617 20,737,195 11,400,807 32,138,002 Add: Premium on reinsurance accepted 1,166,436 137,745 94,425 232,170 1,456 420,462 421,918 Less: Premium on reinsurance ceded 4,487,943 550,863 625,777 1,176,640 5,219,111 2,891,012 8,110,123 Net premium 1,548,647 1,487,132 86,015 1,573,147 15,519,540 8,930,257 24,449,797 Adjustment for change in reserve for unexpired risks 13,698 (40,197) 47,249 7,052 724,663 775,622 1,500,285 Total premium earned (net) 1,534,949 1,527,329 38,766 1,566,095 14,794,877 8,154,635 22,949,512 Fire Marine Marine- Cargo Marine- Others Marine- Total Motor-OD Motor-TP Motor- Total 2012-13 2012-13 2012-13 2012-13 2012-13 2012-13 2012-13 Premium from direct business written-net of service tax 3,803,403 1,605,594 686,296 2,291,890 18,297,738 8,759,869 27,057,607 Add: Premium on reinsurance accepted 1,091,655 110,430 81,231 191,661 1,605 (108,821) (107,216) Less: Premium on reinsurance ceded 3,464,884 585,698 727,637 1,313,335 4,501,510 2,200,199 6,701,709 Net premium 1,430,174 1,130,326 39,890 1,170,216 13,797,833 6,450,849 20,248,682 Adjustment for change in reserve for unexpired risks 44,764 248,092 39,850 287,942 (111,400) (1,058,519) (1,169,919) Total premium earned (net) 1,385,410 882,234 40 882,274 13,909,233 7,509,368 21,418,601
  36. 36. 36 Schedule–2 Claims Incurred (net) Fire Marine Marine- Cargo Marine- Others Marine- Total Motor-OD Motor-TP Motor- Total 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 Claims paid-Direct 1,180,224 1,578,574 74,151 1,652,725 10,919,708 5,623,864 16,543,572 Add: Re-insurance accepted 458,564 26,662 - 26,662 13,372 5,688,343 5,701,715 Less: Re-insurance ceded 1,027,581 435,474 47,953 483,427 2,669,578 3,874,463 6,544,041 Net Claims paid 611,207 1,169,762 26,198 1,195,960 8,263,502 7,437,744 15,701,246 Add: Claims outstanding at the end of the period 1,394,260 808,459 98,574 907,033 3,648,181 33,068,023 36,716,204 Less: Claims outstanding at the beginning of the year 978,180 510,697 65,970 576,667 2,754,597 31,657,721 34,412,318 Total claims incurred 1,027,287 1,467,524 58,802 1,526,326 9,157,086 8,848,046 18,005,132 Fire Marine Marine- Cargo Marine- Others Marine- Total Motor-OD Motor-TP Motor- Total 2012-13 2012-13 2012-13 2012-13 2012-13 2012-13 2012-13 Claims paid-Direct 950,396 1,120,511 367,739 1,488,250 9,070,315 4,266,800 13,337,115 Add: Re-insurance accepted 1,575,440 14,075 - 14,075 3,251 6,944,817 6,948,068 Less: Re-insurance ceded 1,778,258 514,486 345,302 859,788 1,425,771 2,987,548 4,413,319 Net Claims paid 747,578 620,100 22,437 642,537 7,647,795 8,224,069 15,871,864 Add: Claims outstanding at the end of the period 978,180 510,697 65,970 576,667 2,754,597 31,657,721 34,412,318 Less: Claims outstanding at the beginning of the year 757,164 383,014 92,042 475,056 2,295,472 28,965,186 31,260,658 Total claims incurred 968,594 747,783 (3,635) 744,148 8,106,920 10,916,604 19,023,524
  37. 37. 37 Schedule–3 Commission Fire Marine Marine- Cargo Marine- Others Marine- Total Motor-OD Motor-TP Motor- Total 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 Commission paid -Direct 139,588 163,539 7,376 170,915 1,094,846 - 1,094,846 Add: Commission accepted on re- insurance 142,233 9,156 4,288 13,444 - - - Less: Commission ceded on re- insurance 377,034 27,399 (7,347) 20,052 1,048,866 526,538 1,575,404 Net Commission (95,213) 145,296 19,011 164,307 45,980 (526,538) (480,558) Schedule–3A Commission Paid-Direct (` in000’s) 2013-14 778,918 2012-13 Agents 743,854 Brokers 1,478,108 1,093,487 Corporate agency 717,567 654,268 Referral - - Total 2,974,593 2,491,609
  38. 38. 38 Schedule–4 Operating expenses related to insurance business Fire Marine Marine- Cargo Marine - Others Marine- Total Motor-OD Motor-TP Motor- Total 2013-14 2013-14 2013- 14 2013-14 2013-14 2013-14 2013-14 Employees’ remuneration & welfare benefits 108,161 103,865 6,007 109,872 1,083,924 623,711 1,707,635 Travel, conveyance and vehicle running expenses 11,925 11,451 662 12,113 119,501 68,763 188,264 Training expenses 1,177 1,130 65 1,195 11,792 6,785 18,577 Rents, rates & taxes* 20,515 19,700 1,139 20,839 205,590 118,301 323,891 Repairs & maintenance 8,892 8,539 494 9,033 89,110 51,275 140,385 Printing & stationery 2,664 2,558 148 2,706 26,696 15,362 42,058 Communication 11,330 10,880 629 11,509 113,540 65,333 178,873 Legal & professional charges 42,207 19,742 1,142 20,884 206,027 118,552 324,579 Auditors'fees, expenses etc (a)as auditor 304 292 17 309 3,050 1,755 4,805 (b)as adviser or in any other capacity, in respect of (i)Taxation matters - - - - - - - (ii)Insurance matters - - - - - - - (iii)Management services - - - - - - - (c)in any other capacity 43 41 2 43 428 246 674 Advertisement and publicity 30,414 29,206 1,689 30,895 304,793 175,384 480,177 Interest & Bank charges 3,002 2,882 167 3,049 30,079 17,308 47,387 Others (a)Miscellaneous expenses 134,209 128,878 7,454 136,332 1,343,968 773,346 2,117,314 (b)Business & Sales promotion 43,398 41,674 2,410 44,084 434,902 250,251 685,153 Depreciation 17,107 16,428 950 17,378 171,438 98,649 270,087 Service tax on premium account - - - - - - - Total 435,348 397,266 22,975 420,241 4,144,838 2,385,021 6,529,859 *Rent expense is net off rental income of` 23,663 thousand (previous period `20,451 thousand)
  39. 39. 39 Schedule–5 Share Capital (` in 000’s) At March 31,2014 At March 31,2013 Authorised Capital 475,000,000 (previous year: 475,000,000 )Equity Shares of `10 each 4,750,000 4,750,000 Issued Capital 445,055,516 (previous year: 437,015,239) Equity Shares of `10each 4,450,555 4,370,152 Subscribed Capital 445,055,516 (previous year: 437,015,239) Equity Shares of `10 each 4,450,555 4,370,152 Called up Capital 445,055,516 (previous year: 437,015,239) Equity Shares of `10each 4,450,555 4,370,152 Less: Calls unpaid Add: Equity Shares forfeited (Amount originally paid up) - - Less: Par value of Equity Shares bought back - - Less:(i) Preliminary Expenses to the extent not written off - - (ii) Expenses including commission or brokerage on underwriting or subscription of shares - - Total 4,450,555 4,370,152 Note: Of the above, 325,883,744 shares are held by the holding company, ICICI Bank Limited (previous year: 320,635,518 shares) Schedule–6 Reserves and Surplus (` in 000’s) At March 31,2014 - At March 31,2013 1.Capital Reserve - 2.Capital Redemption Reserve - - 3.Share Premium(refernote4.16) Opening balance 13,882,772 13,867,872 Additions during the period 960,393 14,900 Deductions during the period-share issue expenses 1,000 - Closing balance 14,842,165 13,882,772 4.General Reserves Opening balance 333,642 333,642 Additions during the period - - Deductions during the period - - Closing balance 333,642 333,642 Less: Debit balance in Profit and Loss Account - - Less: Amount utilized for Buy-back - - 5.Catastrophe Reserve - - 6.Other Reserves - - 7.Balance of Profit in Profit and Loss Account 4,184,559 - Total 19,360,366 14,216,414
  40. 40. 40 Schedule–7 Borrowings AtMarch31,2014 - AtMarch31,2013 Debentures/ Bonds - Banks - - Financial Institutions - - Others - - Total - - Schedule–8 Investments (` in 000’s) At March 31,2014 At March 31,2013 Long term investments Government securities and Government guaranteed bonds including Treasury Bills 33,077,043 32,643,100 Other Approved Securities - - Other Investments (a)Shares (aa) Equity(note5below) 4,945,338 5,428,577 (bb) Preference 51,894 - (b) Mutual Funds - - (c) Derivative Instruments - - (d) Debentures/Bonds 13,468,070 10,086,243 (e) Other Securities (note6below) 500,000 7,750,000 (f) Subsidiaries - - (g) Investment Properties-Real Estate - - Investments in Infrastructure and Social Sector 22,911,003 10,141,668 Other than Approved Investments 1,239,809 1,531,660 Total Long Term Investments 76,193,157 67,581,248 Short term investments Government securities and Government guaranteed bonds including Treasury Bills(note3below) 102,542 - Other Approved Securities 175,248 - Other Investments (a)Shares (aa) Equity - - (bb) Preference - - (b) Mutual Funds - - (c) Derivative Instruments - - (d) Debentures/Bonds 1,372,263 1,182,892 (e) Other Securities (note7and8below) 14,074,491 8,549,319 (f) Subsidiaries - - (g) Investment Properties-Real Estate - - Investments in Infrastructure and Social Sector 1,050,900 300,000 Other than Approved Investments(note4below) 121,167 511,728 Total Short Term Investments 16,896,611 10,543,939 Total Investments 93,089,768 78,125,187
  41. 41. 41 Schedule–10 Fixed Assets Cost/Gross Block April1, 2013 Additions Deductions March31,2014 Goodwill - - - - Intangibles-Computer Software* 1,879,552 299,499 2,972 2,176,079 Land-Freehold 2,411,770 - - 2,411,770 Leasehold Property - - - - Buildings 236,925 686 - 237,611 Furniture & Fittings 736,248 13,747 118,178 631,817 Information Technology Equipment 433,891 30,376 50,459 413,808 Vehicles 3,293 - - 3,293 Office Equipment 351,825 3,160 12,722 342,263 Others - - - - Total 6,053,504 347,468 184,331 6,216,641 Work in Progress Grand total 6,053,504 347,468 184,331 6,216,641 Previous year 5,673,478 489,045 109,019 6,053,504 *Additions is net of grant received Nil (previous year `7,411 thousand) (refernoteno.5.2.8) (` in 000’s) Depreciation Net Block April1, 2013 For the year ended On Sales/ Adjustments March31,2014 March 31,2014 March 31,2013 - - - - - - 1,108,143 330,924 2,635 1,436,432 739,647 771,409 - - - - 2,411,770 2,411,770 - - - - - - 10,611 3,869 - 14,480 223,131 226,314 512,258 83,345 98,812 496,791 135,026 223,990 359,546 38,371 50,221 347,696 66,112 74,345 1,998 484 - 2,482 811 1,295 157,516 39,887 8,156 189,247 153,016 194,309 - - - - - - 2,150,072 496,880 159,824 2,487,128 3,729,513 3,903,432 165,433 100,897 2,150,072 496,880 159,824 2,487,128 3,894,946 4,004,329 1,744,832 487,957 82,717 2,150,072 4,004,329
  42. 42. 42 Schedule–11 Cash and Bank Balances (` in 000’s) *Other than Fixed Deposits forming part of Investment assets which is reflected under Schedule 8 - Investments Schedule–12 Advances and Other Assets (` in 000’s) AtMarch31,2014 AtMarch31,2013 Advances Reserve deposits with ceding companies 46,619 - Application money for investments - - Prepayments 89,513 84,256 Advances to Directors/Officers - - Advance tax paid and taxes deducted at source (net of provision for tax) 1,375,951 1,383,906 MAT credit entitlement 1,730,076 837,978 Others -Sundry Deposits 208,855 158,254 -Provision for doubtfuldebts (6,083) (3,606) -Surplus in Gratuity fund - - -Advance to Employees against expenses 98 202,870 117 154,765 Total(A) 3,445,029 2,460,905 Other Assets Income accrued on investments/deposits 2,556,115 1,866,509 Outstanding Premiums 4,731,159 3,805,912 Less: Provisions for doubtful debts 2,780 4,728,379 - 3,805,912 Agents’Balances - - Foreign Agencies’Balances - - Due from other Entities carrying on Insurance business (net)(including reinsurers) 26,053,226 26,205,879 AtMarch31,2014 408,524 AtMarch31,2013 Cash (including cheques,drafts and stamps) 487,657 Balances with scheduled banks: (a)Deposit Accounts (aa)Short-term (due within 12 months)* 560,291 1,550,267 (bb)Others - - (b)Current Accounts 650,846 658,228 (c)Others - - Money at Call and Short Notice (a)With Banks - - (b)With otherinstitutions - - Others - - Total 1,619,661 2,696,152
  43. 43. 43 Less: Provisions for doubtful debts 952,647 25,100,579 1,118,944 25,086,935 Due from subsidiaries/holding company - - Deposit with Reserve Bank of India - - [Pursuant to section 7 of Insurance Act, 1938] Others -Service Tax unutilized credit 292,694 44,681 -Service Tax paid in advance 54,782 63,467 -Unsettled investment contract receivable 222,550 - -Margin deposit 30,000 30,000 -Sundry receivable 394 600,420 182 138,330 Total(B) 32,985,493 30,897,686 Total(A+B) 36,430,522 33,358,591 Schedule–13 Current Liabilities (` in 000’s) AtMarch31,2014 65,960 AtMarch31,2013 Agents’Balances 73,706 Balances due to other insurance companies (net) 3,099,040 1,843,425 Deposits held on re-insurance ceded 4,820,511 2,257,643 Premiums received in advance 805,448 1,114,336 Unallocated Premium 1,727,950 1,792,503 Sundry Creditors 2,616,761 1,922,238 Due to subsidiaries/holding company 44,055 40,474 Claims Outstanding (gross) 70,770,449 65,232,383 Due to Officers/Directors - - Others: -Statutory Dues 278,338 300,040 -Salary Payable 18,493 11,455 -Collections-Environment Relief fund (refer note no.5.2.9) 205 266 -Unclaimed amount of policy holders (refer note 5.2.14) 1,025,874 992,986 -Book Overdraft 1,477,818 1,368,691 -Employee rewards 518,977 504,000 -Deposits 7,713 5,804 -Service Tax Liability Total - 3,327,418 87,277,592 - 3,183,242 77,459,950 CORPORATEOVERVIEW
  44. 44. 44 Schedule–14 Provisions (` in 000’s) AtMarch31,2014 22,679,328 AtMarch31,2013 Reserve for unexpired risk 21,228,505 Reserve for premium deficiency (refer note no.5.2.17(D)) - - For taxation (less advance tax paid and Taxes deducted at source) - - For proposed dividends - - For dividend distribution tax - - Others -Gratuity 14,059 36,475 -Long term performance pay 348,701 311,597 -Accrued leave 67,645 62,784 -For future recoverable under reinsurance contracts Total 112,865 543,270 23,222,598 235,277 646,133 21,874,638 Schedule–15 Miscellaneous expenditure (To the extent not written off or adjusted) (` in 000’s) AtMarch31,2014 - AtMarch31,2013 Discount allowed on issue of shares/debentures - Others - - Total - - Schedule–16 Significant accounting policies and notes forming part of the financial statements for the year ended March 31, 2014 1. Background ICICI Lombard General Insurance Company Limited (‘the Company’) was incorporated on October 30, 2000 and is a joint venture between ICICI Bank Limited and Fair fax Financial Holdings Limited. The Company obtained Regulatory approval to undertake General Insurance business on August 3, 2001 from the Insurance Regulatory and Development Authority (‘IRDA’) and has also obtained its certificate of renewal of registration with validity until March31, 2015. 2. Basis of preparation of financial statements The financial statements have been prepared and presented under the historical cost convention, unless otherwise specifically stated, on the accrual basis of accounting, and comply with the applicable accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 (‘the Act’) which as per a clarification issued by Ministry of
  45. 45. 45 Corporate Affairs continue to apply under section 133 of the Companies Act, 2013 (which has superseded section 211 (3C) of the Companies Act, 1956 w.e.f. September 12, 2013), and in accordance with the provisions of the Insurance Act, 1938, Insurance Regulatory and Development Authority Act, 1999, the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies Regulations), 2002 (‘the Regulations’) and orders/ directions prescribed by the IRDA in this behalf, the provisions of the Companies Act, 2013 (to the extent notified) and the Companies Act, 1956 (to the extent applicable) in the manner so required and current practices prevailing within the insurance industry in India. 3. Use of estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as of the balance sheet date, reported amounts of revenues and expenses for the year ended and disclosure of contingent liabilities as of the balance sheet date. The estimates and assumptions used in these financial statements are based upon management’s evaluation of the relevant facts and circumstances as on the date of the financial statements. Actual results may differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods. 4. Significant accounting policies Revenue recognition Premium income Premium including reinsurance accepted is recorded for the policy period at the commencement of risk and for installment cases, it is recorded on installment due dates. Reinstatement premium is recorded as and when such premiums are recovered. Premium earned including reinstatement premium and re-insurance accepted is recognised as income over the period of risk or the contract period based on 1/365 method, whichever is appropriate on a gross basis net of service tax. Any subsequent revisions to premium as and when they occur are recognised over the remaining period of risk or contract period, as applicable. Adjustments to premium income arising on cancellation of policies are recognised in the period in which it is cancelled.
  46. 46. 46 5. Income from reinsurance ceded Commission on reinsurance ceded is recognised as income in the period of ceding the risk. Profit commission under reinsurance treaties, wherever applicable, is recognised as income in the year of final determination of profits and combined with commission on reinsurance ceded. 6. Income earned on investments Interest income on investments is recognised on an accrual basis. Accretion of discount and amortization of premium relating to debt securities and non convertible preference shares is recognised over the holding/ maturity period on a straight-line basis. 7. Dividend income is recognised when the right to receive dividend is established. Realised gain/ loss on securities, which is the difference between the sale consideration and the carrying value in the books of the Company, is recognised on the trade date. In determining the realised gain/loss, cost of securities is arrived at on ‘Weighted average cost’ basis. Further, in case of listed equity shares and mutual funds the profit or loss on sale also includes the accumulated changes in the fair value previously recognised in the fair value change account. Sale consideration for the purpose of realised gain/loss is net of brokerage and taxes, if any, and excludes interest received on sale. 8. Premium received in advance This represents premium received during the period, where the risk commences subsequent to the balance sheet date. 9. Reinsurance premium Insurance premium on ceding of the risk is recognised in the period in which the risk commences in accordance with reinsurance arrangements with the reinsurers. Any subsequent revision to premium ceded is recognised in the period of such revision. Adjustment to reinsurance premium arising on cancellation of policies is recognised in the period in which they are cancelled.
  47. 47. 47 10. Reserve for unexpired risk Reserve for unexpired risk is recognised net of reinsurance ceded and represents premium written that is attributable and to be allocated to succeeding accounting periods for risks to be borne by the Company under contractual obligations on a contract period basis or risk period basis, whichever is appropriate. It is calculated on a daily pro-rata basis subject to a minimum of 50% of the aggregate premium, written on policies during the twelve months preceding the balance sheet date for fire, marine cargo and miscellaneous business and 100% for marine hull business, on all unexpired policies at balance sheet date, in accordance with section 64 V (1) (ii) (b) of the Insurance Act, 1938. 11. Claims Claims incurred comprise claims paid, estimated liability for outstanding claims made following a loss occurrence reported and estimated liability for claims Incurred But Not Reported (‘IBNR’) and claims Incurred But Not Enough Reported (‘IBNER’). Further, claims incurred also include specific claim settlement costs such as survey/legal fees and other directly attributable costs. Claims (net of amounts receivable from reinsurers/co insurers) are recognised on the date of intimation based on internal management estimates or on estimates from surveyors/insured in the respective revenue account(s). Estimated liability for outstanding claims at balance sheet date is recorded net of claims recoverable from/payable to co- insurers/reinsurers and salvage to the extent there is certainty of realisation. Estimated liability for outstanding claims is determined by the management on the basis of ultimate amounts likely to be paid on each claim based on the past experience and in cases where claim payment period exceeds four years based on actuarial valuation. These estimates are progressively revalidated on availability of further information. IBNR reserves are provisions for claims that may have been incurred during the accounting period but have not been reported or claimed. The IBNR provisional so includes provision, for claims that have been incurred but are not enough reported (IBNER). The provision for IBNR and IBNER is based on actuarial estimate duly certified by the Appointed Actuary of the Company. The actuarial estimate is derived in accordance with relevant IRDA regulations and Guidance Note GN21 issued by the Institute of Actuaries of India.
  48. 48. 48 12. Acquisition costs Acquisition costs are those costs that vary with, and are primarily related to the acquisition of new and renewal of insurance contracts viz. commission, policy issue expenses, etc. These costs are expensed in the period in which they are incurred. 13. Premium deficiency Premium deficiency is recognised for the Company as a whole when the sum of expected claim costs and related expenses and maintenance costs (related to claims handling) exceed the reserve for unexpired risks. In computing the overall Premium deficiency in miscellaneous revenue account level, the Premium deficiency arising out of Motor Third Party portfolio including erstwhile IMTPIP and Declined Risk Pool is not recognised. The expected claim costs is calculated and duly certified by the Appointed Actuary. 14. Investments Investments are recorded at cost on traded at and include brokerage, transfer charges, stamps etc, if any, and exclude interest accrued up to the date of purchase. 15. Classification Investments maturing within twelve months from balance sheet date and investments made with the specific intention to dispose off within twelve months are classified as ‘short term investments’. 16. Investments other than ‘short term investments’ are classified as ‘long term investments’. The investments are shown at Company level and not segregated at Shareholder’s level and Policy holder’s level. 17. Valuation Investments are valued as follows: Debt securities and Non–convertible preferences hares All debt securities including government securities and non convertible preference shares are considered as ‘held to maturity’ and accordingly stated at amortised cost determined after amortization of premium or accretion of discount on a straight line basis over the holding period/maturity. CORPORATEOVERVIEWBUSINESSOVERVIEW
  49. 49. 49 Equity shares and Convertible preference shares Listed equities and convertible preference shares at the balance sheet date are stated at fair value, being the last quoted closing price on the National Stock Exchange and in case these are not listed on National Stock Exchange, then based on the last quoted closing price on the Bombay Stock Exchange. Mutual funds (Other than venture capital fund) Mutual fund investments are stated at fair value ,being the closing net asset value at balance sheet date. Fair Value Change Account In accordance with the Regulations, unrealized gain/loss arising due to changes in fair value of listed equity shares and mutual fund investments are taken to the ‘fair value change account’. This balance in the fair value change account is not available for distribution, pending realisation. Investments other than those mentioned above are valued at cost. 18. Impairment of Investments The Company assesses at each balance sheet date whether there is any indication that any investment in equity or units of mutual fund may be impaired. If any such indication exists, the carrying value of such investment is reduced to its recoverable amount and the impairment loss is recognised in the profit and loss account. If at the balance sheet date there is any indication that a previously assessed impairment loss no longer exists, then such loss is reversed and the investment is restated to that extent. 19. Employee Stock Option Scheme (ESOS) The Company follows the intrinsic method for computing the compensation cost, for options granted under the scheme(s). The difference if any, between the intrinsic value and the grant price, being the compensation cost is amortised over the vesting period of the options.
  50. 50. 50 20. Fixed assets, Intangibles and Impairments Fixed assets and depreciation Fixed assets are stated at cost less accumulated depreciation. Cost includes the purchase price and any cost directly attributable to bringing the asset to its working condition for its intended use. Depreciation on assets purchased/disposed off during the year is provided on prorata basis with reference to the date of additions/deductions. Depreciation on fixed assets is provided using higher of the rates based on economic useful lives of assets as estimated by the management and the straight-line method specified as per Schedule XIV of the Companies Act, 1956 as below, In case of following categories of fixed assets, the management’s estimate of the useful lives is lower than prescribed in Schedule XIV of the Companies Act, 1956. Nature of Fixed Assets Management Estimate of Useful Life in years 3.00 Rates prescribed as per Schedule VI of The Companies Act, 2013 Information Technology equipment 6.17 Furniture & Fittings 6.67 15.80 Office Equipment 10.00 21.05 Vehicles 5.00 10.53 Intangibles Assets Intangible assets comprising computer software are stated at costless amortization. Computer software’s including improvements are amortised over a period of 4 years, being the management’s estimate of the useful life of such intangibles. All assets including intangibles individually costing up to `5,000 are fully depreciated/ amortised in the year in which they are acquired. 21. Impairment of assets The Company assesses at each balance sheet date whether there is any indication that any asset may be impaired. If any such indication exists, the carrying value of such assets is reduced to its recoverable amount and the impairment loss is recognised in the profit and loss account. If at the balance sheet date there is any indication that a previously assessed
  51. 51. 51 impairment loss no longer exists, then such loss is reversed and the asset is restated that extent. 22. Operating Lease Operating Lease payments of assets/premises taken on operating lease are recognised as an expense in the revenue(s) and profit and loss account over the lease term on straight-line basis. 23. Employee benefits Provident fund This is a defined contribution scheme and contributions payable to the Regional Provident Fund Authority is provided on the basis of prescribed percentage of salary and is charged to revenue account(s) and profit and loss account. 24. Gratuity Gratuity, which is a defined benefit scheme, is provided on the basis of actuarial valuation including actuarial gains/losses at balance sheet date and is recognised in the revenue account(s) and profit and loss account. 25. Accrued leave Compensated absences are provided based on actuarial valuation including actuarial gains/losses at balance sheet date and is recognised in the revenue account(s) and profit and loss account.
  52. 52. 52 CONCULSION The insurance sector has gone through a number of phases by allowing private companies to solicit insurance and also allowing foreign direct investment. India allowed private companies in insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014. However, the largest life-insurance company in India, Life Insurance Corporation of India is still owned by the government and carries a sovereign guarantee for all insurance policies issued by it. ICICI Lombard GIC Ltd. is the largest private sector general insurance company in India with a Gross Written Premium (GWP) of Rs 71.34 billion for the year ended 31 March 2014. Reflecting a slowdown in India's non-life insurance industry, growth in gross premium income of country's largest private insurer ICICI Lombard fell to 12 per cent in 2013-14 from 19 per cent in the year-ago period. The premium income of ICICI Lombard General Insurance Company at the end of fiscal ended March, 2014 stood at Rs 7,134 crore - a growth of about 12 per cent. In 2012-13, gross premium collection had gone up by 19 per cent to Rs 6,420 crore. Net premium income rose 8.58 per cent to Rs 4,353 crore during 2013-14. Net premium income from the fire insurance stood at Rs 153 crore, up from Rs 138 crore in the previous year. In the marine insurance category, premium income shot up by 78 per cent to Rs 157 crore in 2013-14, from Rs 88 crore in the previous year. With regard to the life insurance business, ICICI Prudential Life's annual premium fell to Rs 3,444 crore, from Rs 3,532 crore in 2012- 13.
  53. 53. 53 BIBLIOGRAPHY  Advanced Financial Accounting – Dr. Varsha Ainapure.- Manan Prakashan  http://business.mapsofindia.com/insurance/policies/types.html  http://financialservices.gov.in/Insurance/Acts/TheInsuranceAct_1938.pdf  http://www.insuranceinfo.com.my/learn_the_basics/types_of_insurance.php?intPrefL angID=1  http://en.wikipedia.org/wiki/General_insurance  http://www.icai.org/post.html?post_id=854  http://www.investopedia.com/terms/f/fire-insurance.asp  http://en.wikipedia.org/wiki/ICICI_Lombard  https://www.icicilombard.com/about-us/Promoters.html

×