Accounting for Insurance Business


Inorder to regulate the insurance business in India, the Insurance Regulatory and Development Authority (IRDA) WAS constituted under IRDA Act, 1999. In 2002, the IRDA came up with the regulations for the preparation of financial statements of insurance companies. According to the Insurance (Amendment) Act, 2002, the First, Second and Third Schedule prescribed for Balance Sheet, Profit and Loss Account and Revenue Account respectively as provided in the Insurance Act 1938 have been omitted. Now, insurance companies have to revenue account, profit and loss account, and balance sheet as prescribed by Insurance Regulatory and Development Authority (IRDA). - The basic accounting principles and accounting standards are the same for insurance business and other businesses. However, there are some specialties in insurance business transactions. The Insurance Regulatory and Development Authority (IRDA) has prescribed the specified formats for the financial statements of the insurance business. These formats are included in Part V of 1 - Schedule A of IRDA Regulations, 2002.


The Insurance Act, 1938 and the IRDA Act, 1999 provide legal framework or insurance accounting in India. The financial statements of insurance business are also to be in compliance with the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI)

Comments

Post a Comment

Popular posts from this blog

Insurable Interest

Image
In simple words, insurable interest means monetary Insurable Interest interest. No person can enter into a valid contract of insurance unless he has insurable interest in the subject matter of insurance. A person is said to have insurable interest in the subject matter, if he suffers financially, by its loss or destruction. Thus a person has insurable interest in his own life, in the life of his spouse or child or debtor. Similarly the owner of a property has an insurable interest in it. It is also important, to know the time at which the insurable interest must exist to execute a valid contract of insurance. It depends on the branch of insurance. In the case of life insurance, the insurable interest must exist at the time when the policy is taken. It may not be in existence at the time of the death of the person whose life is insured. For eg. A creditor can insure the life of his debtor to the extent of the debt. Even if the debtor dies after paying off the debt, the creditor ca...
Read more

Definition - Fire Insurance

Image
Definition A fire insurance may be defined as "a contract by which the insurer undertakes, for a money consideration, to indemnify the insured against the consequences of a fire during an agreed period upto the amount stated in the policy.'  According to V.R. Bhushan and Prof. R S. Sharma, a fire insurance may be defined as "an agreement whereby one party, in return for a consideration, undertakes to indemnify the other party against financial loss which he may sustain, by reason of certain defined subject-matter being damages or destroyed by fire or other defined perils upto an agreed amount." The main purpose of a fire insurance contract is to protect the insured against the loss of his property by fire. A fire insurance contract is a contract of indemnity. It indemnifies the insured against any loss caused by fire. To get compensation for loss of property under fire insurance, it must be proved that the loss of property has arisen due to fire. It is also...
Read more

Requirements as to Capital Structure and Voting Rights and Maintenance of Registers

Image
According to section 6A of the Insurance Act, 1938, the following provisions should be made with regard to the requirements as to capital structure and voting rights and maintenance of registers: 1 . A public company limited by shares having its registered office in India, shall carry on life insurance business only, if it satisfies all the following conditions, namely: i. that the capital of the company consists only of ordinary shares each of which has a single face value ii. that the paid-up amount is the same for all shares whether existing or new, except during any period not exceeding one year allowed by the company for payment of calls on shares; 2 . The voting right of every shareholder of any public company as aforesaid shall in all cases be strictly proportionate to the paid-up amount of the shares held by him. 3 . A public company which carries on life insurance business shall not issue any shares other than ordinary shares of the nature specified in sub-sectio...
Read more