IRDA(Assets,Liabilities and Solvency Margins of Insurers)Regulations,2000

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY

NOTIFICATION

New Delhi, the 14th July, 2000

Insurance Regulatory and Development Authority (Assets, Liabilities, and Solvency Margin of Insurers) Regulations, 2000.

F.No. IRDA/Reg/7/2000.—
In exercise of the powers conferred by clauses (y), (z) and (za) of sub-section (2) of section 114A of the Insurance Act, 1938, (4 of 1938), read with section 26 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), 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 (Assets, Liabilities, and Solvency Margin of Insurers) Regulations, 2000.

(2) They shall come into force from the date 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);

(2) 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 any Rules or Regulations made thereunder, shall have the meanings respectively assigned to them in those Acts or Rules or Regulations.

**3. Valuation of Assets.—**Every insurer shall prepare a statement of the value of assets in Form IRDA- Assets- AA in accordance with Schedule I.

**4. Determination of Amount of Liabilities.—**Every insurer shall prepare a statement of the amount of liabilities in accordance with Schedule II-A, in respect of life insurance business, and in Form HG in accordance with Schedule II-B, in respect of general insurance business, as the case may be.

**5. Determination of Solvency Margin.—**Every insurer shall prepare a statement of solvency margin in accordance with Schedule III-A, in respect of life insurance business, and in Form KG in accordance with Schedule III-B, in respect of general insurance business, as the case may be.

6. Health Insurance Business. — Where the insurer transacts health insurance business, providing health covers, the amount of liabilities shall be determined in accordance with the principles specified under these Regulations.

7. Business outside India.— Where the insurer transacts insurance business in a country outside India, and submits statements or returns or any such particulars to a public authority of that country, he shall enclose the same along with the Forms specified in accordance with these Regulations and the Insurance Regulatory and Development Authority (Actuarial Report and Abstract) Regulations, 2000.

Provided that if the appointed actuary is of the opinion that it is necessary to set additional reserves over and above the reserves shown in the statements or returns or any such particulars submitted to the public authority of a country outside India, he may set such additional reserves.

8. Furnishing of Forms.--- The Forms, namely, Form IRDA- Assets- AA , Form HG, and Form KG, shall be furnished separately for Business within India and Total Business transacted by the insurer.

9. Personal visit of appointed actuary to the Authority.-- The Authority may, if considered necessary and expedient, ask the appointed actuary to make a personal visit to the office of the Authority to elicit from him any further information.

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Schedule I

VALUATION OF ASSETS

(see Regulation 3)

1. Interpretation. In this Schedule, unless the context otherwise requires, 'non-mandated investments' means those investments that are neither approved securities nor approved investments.

2. Values of Assets.—(1) The following assets should be placed with value zero,--

• (a) Agent's balances and outstanding premiums in India, to the extent they are not realised within a period of thirty days;
• (b) Agents' balances and outstanding premiums outside India, to the extent they are not realisable ;
• (c) Sundry debts, to the extent they are not realisable;
• (d) Advances of an unrealisable character;
• (e) Furniture, fixtures, dead stock and stationery;
• (f) Deferred expenses;
• (g) Profit and loss appropriation account balance and any fictitious assets other than pre-paid expenses;
• (h) Reinsurer's balances outstanding for more than three months;
• (i) Preliminary expenses in the formation of the company;

(2) The value of computer equipment including software shall be computed as under:--

• (i) seventy five per cent. of its cost in the year of purchase;
• (ii) fifty per cent. of its cost in the second year;
• (iii) twenty-five per cent. of its cost in the third year; and
• (iv) zero per cent. thereafter.

(3) All other assets of an insurer have to be valued in accordance with the Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2000.

**3. Statement of Assets.--**Every insurer shall prepare a statement of assets in Form IRDA-Assets- AA.

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Form IRDA- Assets- AA

(See Regulation 3)

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (ASSETS, LIABILITIES, AND SOLVENCY MARGIN OF INSURERS) REGULATIONS, 2000.

Statement of Assets as at $31^{\text{st}}$ March, 20____

Form Code: [ ][ ][ ][ ][ ][ ][ ][ ][ ]

Name of Insurer: ________________ Registration Number: ________________ Date of registration: ________________

Classification: Business Within India/ Total Business

I certify that the statement has been prepared in accordance with Schedule I.

Place
Date

Name and Signature of Appointed Actuary.
(in case of a life insurer)

/ Name and Signature of Auditor
(in case of a general insurer)

Notes: The statement shall show the value of the above-mentioned categories of assets in accordance with Regulation 2 in Schedule I.

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Schedule II-A

Valuation of Liabilities - Life Insurance

(See Regulation 4)

**1. Interpretation.--**In this Schedule, --

• (a) "valuation date", in relation to an actuarial investigation, means the date to which the investigation relates.
• (b) "universal life contracts" means those contracts that are presented in an unbundled form. The contracts where policyholders have an option to invest in units of insurer's segregated fund(s) shall be treated as "linked business"; and others shall be treated as "non-linked business".
• (c) "segregated funds" means funds earmarked in respect of linked business.

2. Method of Determination of Mathematical Reserves.—(1) Mathematical Reserves shall be determined separately for each contract by a prospective method of valuation in accordance with sub-paras (2) to (4).

(2) The valuation method shall take into account all prospective contingencies under which any premiums (by the policyholder) or benefits (to the policyholder/beneficiary) may be payable under the policy, as determined by the policy conditions. The level of benefits shall take into account the reasonable expectations of policyholders (with regard to bonuses, including terminal bonuses, if any) and any established practices of an insurer for payment of benefits.

(3) The valuation method shall take into account the cost of any options that may be available to the policyholder under the terms of the contract.

(4) The determination of the amount of liability under each policy shall be based on prudent assumptions of all relevant parameters. The value of each such parameter shall be based on the insurer's expected experience and shall include an appropriate margin for adverse deviations (hereinafter referred to as MAD) that may result in an increase in the amount of mathematical reserves.