Company : Sol Infotech Pvt. Ltd. Website : www.courtkutchehry.com INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (PREPARATION OF FINANCIAL STATEMENTS AND AUDITOR'S REPORT OF INSURANCE COMPANIES)REGULATIONS, 2000 CONTENTS 1. Short title and commencement 2. Definitions 3 . Preparation of financial statements, management report and auditors report SCHEDULE A :- PRINCIPLES OF COMPENSATION SCHEDULE 1 :- Premium SCHEDULE 2 :- Commission Expenses SCHEDULE 3 :- Operating Expenses Related to Insurance Business SCHEDULE 4 :- Benefits Paid [NET] SCHEDULE 5 :- Share Capital SCHEDULE 5A :- Pattern of Shareholding SCHEDULE 6 :- Reserves and Surplus SCHEDULE 7 :- Borrowings SCHEDULE 8 :- Investments - Shareholders SCHEDULE 8A :- Investments - Policyholders SCHEDULE 9 :- Loans SCHEDULE 10 :- Fixed Assets SCHEDULE 11 :- Cash and Bank Balances SCHEDULE 12 :- Advances and Other Assets SCHEDULE 13 :- Current Liabilities SCHEDULE 14 :- Provisions SCHEDULE 15 :- Miscellaneous Expenditure SCHEDULE B :- B PART :- ACCOUNTING PRINCIPLES FOR PREPARATION OF FINANCIAL STATEMENTS PART :- DISCLOSURES FORMING PART OF FINANCIAL STATEMENTS PART :- GENERAL INSTRUCTIONS FOR PREPARATION OF FINANCIAL STATEMENTS PART :- CONTENTS OF MANAGEMENT REPORT PART :- PREPARATION OF FINANCIAL STATEMENTS SCHEDULE 1 :- Premium Earned [NET] SCHEDULE 2 :- Claims Incurred (NET) SCHEDULE 3 :- Commission SCHEDULE 4 :- Operating Expenses Related to Insurance Business SCHEDULE 5 :- Share Capital SCHEDULE 5A :- Share Capital Pattern of Shareholding SCHEDULE 6 :- Reserves and Surplus SCHEDULE 7 :- Borrowings SCHEDULE 8 :- Investments SCHEDULE 9 :- Loans SCHEDULE 10 :- FIXED ASSETS SCHEDULE 11 :- Cash and Bank Balances SCHEDULE 12 :- Advances and Other Assets SCHEDULE 13 :- Current Liabilities SCHEDULE 14 :- Provisions SCHEDULE 15 :- Miscellaneous Expenditure SCHEDULE C :- AUDITORS REPORT INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (PREPARATION OF FINANCIAL STATEMENTS AND AUDITOR'S REPORT OF INSURANCE COMPANIES)REGULATIONS, 2000 F.No. IRDA/Reg./8/2000, dated the 14th August, 20001 -In exercise of the powers conferred by Sec.114-A of the Insurance Act, 1938 (4 of 1938), the Authority, in consultation with the Insurance Advisory Committee, hereby makes the following regulations, namely:- 1. Short title and commencement :- (1) These regulations may be called the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2000. (2) They shall come into force from the date1 of their publication in the Official Gazette. 2. Definitions :- (1) In these regulations, unless the context otherwise requires- (a) "Act" means the Insurance Act, 1938 (4 of 1938); (b) "Authority" means the Insurance Regulatory and Development Authority established under sub-section (1) of Section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999); (c) All words and expressions used herein and not defined but defined in the Insurance Act, 1938 (4 of 1938), or in the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), or in the Companies Act, 1956 (1 of 1956) shall have the meanings respectively assigned to them in those Acts. 3. Preparation of financial statements, management report and auditors report :- (1) An insurer carrying on life insurance business, after the commencement of these Regulations, shall comply with the requirements of Schedule A. (2) An insurer carrying on general insurance business, after the commencement of these regulations, shall comply with the requirements of Schedule B : Provided that this sub-regulation shall apply, mutatis mutandis, to re- insurers, until separate regulations are made. (3) The report of the auditors on the financial statements of every insurer and re-insurer shall be in conformity with the requirements of Schedule C, or as near as thereto as the circumstances permit. (4) The Authority may, from time to time, issue separate guidelines in the matter of appointment, continuance or removal of auditors of an insurer or re-insurers, as the case maybe, and such guidelines may include prescriptions regarding qualifications and experience of auditors, their rotation, period of appointment etc. SCHEDULE A PRINCIPLES OF COMPENSATION SCHEDULE 1 Premium Particulars Current Year Previous Year (Rs. '000) (Rs. '000) Premium from direct business written Add: Premium on re-insurance accepted Less: Premium on re-Insurance ceded Net Premium Adiustment for changes In Unearned Premium Adjustment for changes In premium received In advance Total Premium Earned (Net) Premium Income from business effected: In India Outside India Total Premium Earned (Net) \ Notes: (a) In case of premiums less re-insurance, in respect of any segment of insurance business exceeds 10 per cent. of total premium earned, the same shall be disclosed separately. (b) Re-insurance premiums whether on bustiness ceded or accepted are to be brought into account, before deducting commission, under the head of re-insurance premiums. SCHEDULE 2 Commission Expenses Particulars Current Year Previous Year (Rs. -000) (Rs. -000) Claims paid Direct Add. Re-insurance accepted Less: Re-insurance Ceded Net Claims paid Total Claims Incurred Claims paid to claimants In India Outside India Total Claims Incurred Notes: (a) Incurred But Not Reported (IBNR), Incurred But Not Enough Reported (IBNER) claims should be included in the amount for claims. (b) Claims Include claims settlement costs. (c) The surveyor fees, legal and other expenses shall also form part of claims cost. (d) Claims cost should not be adjusted for estimated salvage value if there is a sufficient certainty of its realisation. SCHEDULE 3 Operating Expenses Related to Insurance Business Particulars Current Year Previous Year (Rs. '000) (Rs. -000) Commission Paid Direct Add: Re-insurance Accepted Less: Commission on Re- insurance ceded Net Commission Note: The profit/commission, if any, are to be combined with the Re-insurance accepted or Re-insurance ceded figures. SCHEDULE 4 Benefits Paid [NET] Particulars Current Year Previous Year (Rs. '000) (Rs. '000) 1. Employees' remuneration and welfare benefits 2. Managerial remuneration 3. Travel, conveyance and vehicle running expenses 4. Rents, rates and taxes 5. Repairs 6. Printing & stationery 7. Communication 8. Legal & professional charges 9. Medical fees 10. Auditors' fees, expenses etc. (a) as auditor (b) as adviser or In any other capacity, in respect of (i) Taxation matters (ii) Insurance matters (iii)Management services; and (c) in any other capacity. 11. Advertisement and publicity 12. Interest & Bank Charges 13. Others (to be specified) 14. Depreciation TOTAL Notes: (a) Items of expenses in excess of one per cent. of net premium or Rs 5,00,000 whichever is higher, shall be shown as a separate line Item. (b) Under the sub-head "Others", 'Operating Expenses (Insurance Business shall include items like foreign exchange gains or losses and other items. SCHEDULE 5 Share Capital Particulars Current Year Previous Year (Rs. '000) (Rs. '000) 1. Authorised Capital Equity Shares of Rs.....each 2. Issued Capital Equity Shares of Rs.....each 3. Subscribed Capital Equity Shares of Rs.....each 4. Called-up Capital Equity Shares of Rs..... each 5. Less: Calls unpaid Add; Equity Shares forfeited (Amount originally paid up) Less: Preliminary Expenses Expenses including commission or brokerage on Underwriting or subscription of shares. TOTAL Notes: (a) The amount capitalised on account of issue of bonus should be disclosed. (b) In case, any part of the capital is held by a holding company, the same should be separately disclosed. SCHEDULE 5A Pattern of Shareholding [As certified by the Management] Shareholder Current Year Previous Year Number of Shares %of Holding Number of Shares %of Holding Promoters * Indian * Foreign Others TOTAL SCHEDULE 6 Reserves and Surplus Particulars Current Year Previous Year (Rs. - 000) (Rs. - 000) 1. Capital Reserve 2. Capital Redemption Reserve 3. Share Premium 4. General Reserves Less: Debit Balance in Profit and Loss Account Less: Amount utilized for Buy-back 5. Catastrophe Reserve 6. Other Reserves (to be specified) 7. Balance of Profit In Profit & Loss Account TOTAL Note: Additions to and deductions from the reserves should be disclosed under each of the specified heads. SCHEDULE 7 Borrowings Particulars Current Year Previous Year (Rs. '000) (Rs. -000) 1. Debentures/ Bonds 2. Fixed Deposits 3. Banks 4. Financial Institutions 5. Other entities carrying on Insurance business 6. Others (to be specified) TOTAL Notes: (a) The extent to which the borrowings are secured shall be separately disclosed stating the nature of the security under each sub-heads. (b) Amounts due within 12 months from the date of Balance-Sheet should be shown separately. SCHEDULE 8 Investments - Shareholders Particulars Current Year Previous Year (Rs. '000) (Rs. '000) LONG TERM INVESTMENTS 1. Government securities and Government guaranteed bonds including Treasury Bills 2. Other Approved Securities 3. Other Investments (a) Shares (aa) Equity (bb) Preference (b) Mutual Funds (c) Derivative Instruments (d) Debentures/Bonds (e) Other Securities (to be specified) (f) Subsidiaries (g) Investment Properties-Real Estate SHORT TERM INVESTMENTS 1. Government securities and Government guaranteed bonds Including Treasury Bills 2. Other Approved Securities 3. Other Investments (a) Shares (aa) Equity (bb) Preference (b) Mutual Funds (c) Derivative Instruments (d) Debentures/Bonds (e) Other Securities (to be specified) (f) Subsidiaries (g) Investment Properties-Real Estate TOTAL INVESTMENTS 1. In India 2. Outside India TOTAL Notes: (a) Investments in subsidiary/holding companies, joint ventures and associates shall be separately disclosed, at cost. (i) Holding company and subsidiary shall be construed as. Significant Influence may be exercised in several ways, for example, by representation on the board of directors, participation in the policy making process, material intercompany transactions, interchange of managerial defined in the Companies Act, 1956 . (ii) Joint Venture is a contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control. (iii) Joint control is the contractually agreed sharing of power to govern the financial and operating policies of an economic activity to obtain benefits from it. (iv) Associate is an enterprise in which the company has significant influence and which is neither a subsidiary nor i joint venture, of the company. (v) Significant influence (for the purpose of this schedule) means participation in the financial and operating policy decisions of a company, but not necessarily control of those policies personnel or dependence on technical information. Significant Influence may be gained by share ownership, statute or agreement. As regards share ownership. If an investor holds, directly or indirectly through subsidiaries, 20 per cent. or more of the voting power of the investee it is presumed that the Investor does have significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the investor holds, directly or indirectly through subsidiaries, less than 20 per cent. of the voting power of the investee, it is presumed that this investor does not have significant influence, unless such influence is clearly demonstrated. A substantial or majority ownership by investor does not necessarily preclude an investor from having significant influence. (b) Aggregate amount of company's Investments other than listed equity securities and derivative instruments and also the market value thereof shall be disclosed. (c) Investments made out of Catastrophe reserve should be shown separately. (d) Debt securities will be considered as "held to maturity" securities and will be measured at historical cost subject to amortisation. (e) Investment Property means a property [land or building or part of a building or both] held to earn rental income or for capital appreciation or for both, rather than for use in services or for administrative purposes. SCHEDULE 8A Investments - Policyholders Particulars Current Year Previous Year (Rs. - 000) (Rs. 000) LONG TERM INVESTMENTS 1. Government securities and Government guaranteed bonds Including Treasury Bills 2. Other Approved Securities 3. (a) Shares (aa) Less: Equity (bb)Less: Preference (bl Mutual Funds (c) Derivative Instruments (d.) Debentures/Bonds (e) Other Securities (to be specified) (f) Subsidiaries (g) Investment Properties-Real Estate 4. Investments in Infrastructure and Social Sector 5. Other than Approved Investments SHORT TERM INVESTMENTS 1. Government securities and Government guaranteed bonds Including Treasury Bills 2. Other Approved Securities 3. (a) Shares (aa) Less: Equity (bb) Less: Preference (b) Mutual Funds (c) Derivative Instruments (d) Debentures/Bonds (e) Other Securities (to be specified) (f) Subsidiaries (g) Investment Properties-Real Estate 4. Investments in Infrastructure and Social Sector 5. Other than Approved Investments TOTAL INVESTMENTS 1. In India 2. Outside India TOTAL Notes (applicable to Schedules 8 and 8-A) (a) Investments in subsidiary/holding companies, joint ventures and associates shall be separately disclosed, at cost. (i) Holding company and subsidiary shall be construed as defined in the Companies Act, 1956 ; (ii) Joint Venture-is a contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control. (iii) Joint control - is the contractually agreed sharing of power to govern the financial and operating policies of an economic activity to obtain benefits from it. (iv) Associate - is an enterprise in which the company has significant influence and which is neither a subsidiary nor a joint venture of the company. (v) Significant influence (for the purpose of this schedule) - means participation in the financial and operating policy decisions of a company, but not control of those policies. Significant Influence may be exercised in several ways, for example by representation of the board of directors, participation in the policy making process, material inter-company transactions, interchange of managerial personnel or dependence on technical information. Significant influence may be gained by share ownership, statute or agreement. As regards share ownership, if an investor holds, directly or indirectly through subsidiaries, 20 per cent. or more of the voting power of the investee, it is presumed that tile Investor does have significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the Investor holds, directly or Indirectly through subsidiaries, less than 20 per cent. of the voting power of the Investee, it is presumed that the investor does not have significant influence, unless such influence is clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an investor from having significant influence. (b) Aggregate amount of company's investments other than listed equity securities and derivative instruments and also the market value thereof shall be disclosed. (g) Investments made out of Catastrophe reserve should be shown separately (h) Debt securities will be considered as "held to maturity" securities and will be measured at historical costs subject to amortisation. (i) Investment Property means a property [land or building or part of a building or both] held to earn rental income or for capital appreciation or for both, than for use in services or for administrative purposes. SCHEDULE 9 Loans Particulars Current Year Previous Year (Rs. '000) (Rs. '000) 1. SECURITY-WISE CLASSIFICATION Secured (a) On mortgage of property (aa) In India (bb) Outside India (b) On Shares, Bonds, Govt. Securities (c) Others (to be specified) Unsecured TOTAL 2. BORROWER-WISE CLASSIFICATION (a) Central and State Governments (b) Banks and Financial Institutions (c) Subsidiaries (d) Industrial Undertakings (e) Others (to be specified) TOTAL 3. PERFORMANCE-WISE CLASSIFICATION (a) Loans classified as standard (aa) In India (bb) Outside India (b) Non- performing loans less provisions (aa) In India (bb) Outside India TOTAL 4. MATURITY-WISE CLASSIFICATION (a) Short Term (b) Long Term TOTAL Notes: (a) Short-term loans shall include those, which are repayable within 12 months of the balance sheet date. Long term loans shall be the loans other than short-term loans. (b) Provisions against non-performing loans shall be shown separately. (c) The nature of the security in case of all long term secured loans shall be specified in each case. Secured loans for the purposes of this schedule, means loans secured wholly or partly against an asset of the company. (d) Loans considered doubtful and the amount of provision created against such loans shall be disclosed. SCHEDULE 10 Fixed Assets \ \ \ \ \ \ \ \ \(Rs. '000) Cost/Gross Block Net Block Depreciation OpeningAdditionsDeductionsClosingUptoFor On To As at Previous Last year the year sales/adjustmentsDate year end year Goodwill Intangibles (specify) LandFreehold Leasehold Property Buildings Furniture & Fittings Information Technology Equipment Vehicles Office Equipment Others (Specify nature) TOTAL PREVIOUS YEAR Note: Assets included in land, building and property above exclude Investment Properties as defined in note (e) to Sch. 8. SCHEDULE 11 Cash and Bank Balances Particulars Current Year Previous Year (Rs. '000) (Rs. '000) 1. Cash (including cheques, drafts and stamps) 2. Bank Balances (a) Deposit Accounts (aa) Less: Short-term (due within 12 months of the date of Balance Sheet) (bb)Less: Others (b) Current Accounts (b) Current Accounts (c) Others (to be specified) 3. Money at Call and Short Notice (a) With Banks (b) With other institutions 4. Others (to be specified) TOTAL Balance with non-scheduled banks included in 2 and 3 above CASH & BANK BALANCES 1. In India 2. Outside India TOTAL Note: Bank balance may include remittances in transit. If so, the nature, and amount should be separately stated. SCHEDULE 12 Advances and Other Assets Particulars Current Year Previous Year (Rs. '000) (Rs. '000) ADVANCES 1. Reserve deposits with ceding companies 2. Advances to ceding companies 3. Application money for Investments 4. Pre-payments 5. Advances to Officers/Directors 6. Advance tax paid and taxes deducted at source 7. Others (to be specified) TOTAL (A) OTHER ASSETS 1. Income accrued on Investments 2. Outstanding Premiums 3. Agents' Balances 4. Foreign Agencies' Balances 5. Due from other Insurance Entities 6. Due from subsidiaries/holding 7. Re-Insurance claims/balances receivable 8. Deposit with Reserve Bank of India [Pursuant to Sec. 7 ofi{nsurance Act, 19381 9. Others (to be specified) TOTAL (B) TOTAL (A + B) Notes: (a) The items under the above heads shall not be shown net of provisions for doubtful amounts. The amount of provision against each head should be shown separately. (b) The term 'officer' should conform to the definition of the word 'officer' given under the Companies Act, 1956 . SCHEDULE 13 Current Liabilities Particulars Current Year Previous Year (Rs. '000) (Rs. '000) 1. Reserve for Unearned Premium 2. Agents' Balances 3. Balances due to other insurance companies 4. Advances from Treaty Companies 5. Deposits held on re-insurance ceded 6. Premiums received in advance 7. Sundry creditors 8. Due to subsidiaries/holding company 9. Claims Outstanding 10. Due to Officers/Directors 11. Others (to be specified) TOTAL SCHEDULE 14 Provisions Particulars Current Year Previous Year (Rs. '000) (Rs. -000) 1. Reserve for Unexpired risk. 2. For taxation (less advance tax paid and taxes deducted at source) - 3. For proposed dividends 4. For dividend distribution tax 5. Others (to be specified) TOTAL SCHEDULE 15 Miscellaneous Expenditure (To the extent not written off or adjusted) Particulars Current Year Previous Year (Rs. '000) (Rs. -000) 1. Discount Allowed In issue of shares/debentures 2. Others (To be specified) TOTAL Notes: (a) No item shall be included under the head "Miscellaneous Expenditure," and carried forward unless: 1. some benefit from the expenditure can reasonably be expected to be received in future, and 2. the amount of such benefit is reasonably determinable. (b) The amount to be carried forward in respect of any item included under the head "Miscellaneous Expenditure" shall not exceed the expected future revenue/other benefits related to the expenditure. SCHEDULE B B PART ACCOUNTING PRINCIPLES FOR PREPARATION OF FINANCIAL STATEMENTS PART DISCLOSURES FORMING PART OF FINANCIAL STATEMENTS PART GENERAL INSTRUCTIONS FOR PREPARATION OF FINANCIAL STATEMENTS PART CONTENTS OF MANAGEMENT REPORT PART PREPARATION OF FINANCIAL STATEMENTS SCHEDULE 1 Premium Earned [NET] SCHEDULE 2 Claims Incurred (NET) SCHEDULE 3 Commission SCHEDULE 4 Operating Expenses Related to Insurance Business SCHEDULE 5 Share Capital SCHEDULE 5A Share Capital Pattern of Shareholding SCHEDULE 6 Reserves and Surplus SCHEDULE 7 Borrowings SCHEDULE 8 Investments SCHEDULE 9 Loans SCHEDULE 10 FIXED ASSETS SCHEDULE 11 Cash and Bank Balances SCHEDULE 12 Advances and Other Assets SCHEDULE 13 Current Liabilities SCHEDULE 14 Provisions SCHEDULE 15 Miscellaneous Expenditure SCHEDULE C AUDITORS REPORT The report of the auditors on the financial statements of every insurer shall deal with the matters specified herein: 1. (a) That they have obtained all the information and explanations which, to the best of their knowledge and belief were necessary for the purposes of their audit and whether they have found them satisfactory; (b) Whether proper books of account have been maintained by the insurer so far as appears from an examination of those books; (c) Whether proper returns, audited or unaudited, from branches and other offices have been received and whether they were adequate for the purpose of audit; (d) Whether the Balance Sheet, Revenue Account and Profit and Loss Account dealt with by the report and the Receipts and Payments Account are in agreement with the books of account and returns; (e) Whether the actuarial valuation of liabilities is duly certified by the appointed actuary including to the effect that the assumptions for such valuation are in accordance with the guidelines and norms, if any, issued by the Authority, and/or the Actuarial Society of India in concurrence with the Authority. 2. The auditors shall express their opinion on: (a) (i) Whether the balance sheet gives a true and fair view of the insurer's affairs as at the end of the financial year/period; (ii) Whether the revenue account gives a a true and fair view of the surplus of the deficit for the financial year/period; (iii) Whether the Profit and Loss Account gives a true and fair view of the profit or loss for the financial year/period; (iv) Whether the receipts and payments account gives a true and fair view of the receipts and payments for the financial year/period; (b) The financial statements stated at (a) above are prepared in accordance with the requirements of the Insurance Act, 1938 (4 of 1938), the Insurance Regulatory and Development Act, 1999 (41 of 1999) and the Companies Act, 1956 (1 of 1956), to the extent applicable and in the manner so required. (c) Investments have been valued in accordance with the provisions of the Act and these regulations. (d) The accounting policies selected by the insurer are appropriate and are in compliance with the applicable accounting standards and with the accounting principles, as prescribed in these regulations or any order or direction issued by the Authority in this behalf. 3. The auditors shall further certify that: (a) they have reviewed the management report and there is no apparent mistake or material inconsistencies with the financial statements; (b) the insurer has complied with the terms and conditions of the registration stipulated by the Authority. 4. A certificate signed by the auditors [which shall be in addition to any other certificate or report which is required by law to be given with respect to the balance sheet] certifying that;- (a) they have verified the cash balances and the securities relating to the insurer's loans, reversions and life interests (in the case of life insurers) and investments; (b) to what extent, if any, they have verified the investments and transactions relating to any trusts undertaken by the insurer as trustee; and (c) no part of the assets of the policy holers' funds has been directly or indirectly applied in contravention of the provisions of the Insurance Act, 1938 (4 of 1938) relating to the application and investments of the policy holders' funds.