ANNUAL REPORT 2007-08
Control and regulation of rates, advantages, terms
and conditions that may be offered by the insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under
Section 64 U of the Insurance Act 1938 (4 of 1938)
As an adjunct to reforms in the insurance sector and after detailed deliberations and discussions with various stakeholders, de-tariffing of the non-life industry was notified by the Authority w.e.f., 01-01-2007 except in the case of Motor Third Party cover. It was envisaged that this measure will provide better choices to policyholders, differentiated rates consistent with the level of risks borne as well as overall improvement in risk management.As a first step, de-tariffing has been confined to de-control of rates only and terms & conditions of the policy will be considered later subsequently. In order to moderate the impact of tariff increase on commercial vehicle owners the Authority has retained the powers to determine the rates of Motor – Third Party premium, a Motor third party Pool has been created to ensure involvement of all general insurers in the underwriting and management of motor third party risk. The pool is managed by the General Insurance Corporation.
Specifying the form and manner in which books
of accounts shall be maintained and statements of accounts shall be rendered by Insurers and other
Additional measures taken by the Authority to improve the transparency and disclosures in reporting in the financial statements:
As part of the review of the financial statements filed with the Authority on an annual basis and based on the analysis, clarifications are sought and/or attention is drawn to various non-compliances/ non-disclosures. While specific non-compliances/deviations are communicated to the insurers, certain common deficiencies have been observed in the compliance with various regulatory requirements connected to the preparation of financial statements. With a view to ensuring compliance and avoiding recurrence of the shortcomings observed, the Authority decided to reiterate clarifications issued on earlier occasions
through the comprehensive Circular for the guidance of the insurers.
Effective December, 2007, all insurers have been advised to file the quarterly financial statements with the IRDA. These statements include the Balance Sheet, Revenue A/c (Policyholders’ A/c) and the Profit & Loss A/c (Shareholders’ A/c).
Regulating investment of funds by insurance
The Regulations of investment companies were issued by Subsequently, the innovations in
of funds by the insurance the Authority in 2000. the financial markets led to
approached the Authority to allow them to invest their funds in the new instruments also. In the light of this, the Authority had setup a Working Group to review the existing statutory prescriptions on investments for insurance companies, constraints faced by them and to suggest changes if necessary. The Working Group suggested amendments to the Regulations by providing flexibility to the Authority in prescribing the manner in which funds can be invested by the insurance companies. The Working Group while making suggestions have also examined the present Returns prescribed for monitoring the information on investments and suggested certain changes in the format which will facilitate the Authority in supervision purposes. The Authority has examined the recommendations. Some of the recommendations require changes in the Regulations. A suitable framework for implementation was also proposed. Accordingly, the Authority has issued new regulations on investment of funds by insurance companies vide ‘IRDA(Investment)(Fourth Amendment)Regulations,2008’ after
obtaining the approval of Notification was issued..
Regulating maintenance of margin of solvency
Every insurer is required to maintain a required Solvency Margin as per the Section 64 VA of the Insurance Act 1938. Every insurer shall maintain an excess of the value of assets over the liabilities. The excess prescribed by the IRDA, is referred to as Required Solvency Margin. The IRDA (Assets, Liabilities