Page 49 - Insurance Times November 2019
P. 49

Circular





                                                                   IRDAI Circular












         Preparation of Financial Statements by                  c)  Report the “Contribution to Policyholders Account
                                                                     towards Excess EoM” towards the excess of
         Life Insurers                                               expenses over the allowable limits, as expense

         Ref No: IRDA/F&A/CIR/MISC/184/10/2019                       under Profit & Loss Account under separate sub-
                                                                     line item, below the line “expenses other than
                                     Date: 11th October, 2019
                                                                     those directly related to insurance business”.
         In order to bring further uniformity, comparability and fair  d) Similarly, the contribution towards the
         presentation of financial position in the Financial         Remuneration of MD/ CEOs/ WTDs over and
         Statements filed by the insurers, the Authority, in exercise  above the specified limits allowed to be charged
         of the powers under Section 14 of IRDA Act, 1999, hereby    to the Policyholders Account, should be shown
         issues the following directions: -                          separately as a line item in the Profit and Loss
                                                                     Account (Shareholders Account).
         1. Presentation of Excess of Expenses of             2. Deviation from prescribed Formats
             Management (EoM)                                    It is observed that some insurers have been modifying
             The Authority vide IRDAI (Expenses of Management of  the formats as specified in the IRDA (Preparation of
             Insurers transacting Life Insurance business) Regulations,  Financial Statements and Auditor’s Report of Insurance
             2016 has specified the limits of expenses of management  Companies) Regulations, 2002 by way of addition/
             for life insurers. In case actual expenses of management  deletion of some line items, during preparation of the
             exceeds the allowable limits specified in the Regulations,  financial statements.
             the excess is required to be charged to Shareholders
                                                                 All insurers are hereby advised to strictly adhere to the
             Account I.e. Profit and Loss Account (P&L Account).
                                                                 formats (including schedules) specified by the
             It has been observed that some insurers are presenting  Regulations and the directions issued thereunder by
             the operating expenses in the Revenue Account       the Authority. Any new line item, if so warranted to be
             (Policyholders Account), net of the excess EoM beyond  disclosed separately, may be shown under “Others” in
             allowable limits. This does not present the exact   Revenue Account, P&L Account and/or the relevant
             expense overrun position of the Insurers. In view of the  schedule of the financial statements, by giving the
             same, all Insurers are hereby advised to present the  details of particulars of each item.
             Expenses of Management (EoM) in Financial        3. Rewards and Remuneration to Agents/
             Statements, as under: -
                                                                 Brokers/Other intermediaries
             a) Report the gross amount of Operating expenses    In order to ensure consistency, uniformity and fair
                 actually incurred during the period, in Schedule-3  presentation, it is hereby advised that rewards and/or
                 and the Revenue Account, without deducting
                                                                 remuneration to agents, brokers or other
                 ‘Excess of Expenses over the Allowable limits’.
                                                                 intermediaries shall be shown as part of head
             b) Report the “Contribution from Shareholders       “Commission” in the financial statements.  Rewards
                 Account towards Excess EoM” in excess of the    shall be shown as a separate line item in Schedule 2
                 allowable expenses, as Income under Revenue     “Commission”, below the line “Net Commission” in the
                 Account under separate sub-line item.           financial statements.


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