IRDAI issues Direction for preparation of Solvency Statement for the FY 2019-20 and Onwards

May 24, 2019 | by Avantis RegTech Legal Research Team


The Insurance Regulatory Development Authority of India (IRDAI) on May 20, 2019, issues Direction for the preparation of Solvency Statement for the financial year 2019-20 under IRDAI (Assets, Liabilities, and Solvency Margin of General Insurance Business) Regulations, 2016. 

In order to have uniformity, consistency and comparability, the Authority hereby issues the following directions:

1. It has been observed that IT/Computer software is considered by most of the insurers for the purpose of computation of Available Solvency Margin, even though the same being intangible asset is “inadmissible” in nature. In this regard, it is hereby directed that for the purpose of computation of solvency margin, the IT/Computer software shall be depreciated at the rate of not less than 1/12in each quarter on straight line basis, starting from the quarter in which the IT/Computer software was added to the Gross Block.

2. The Authority has also observed that the assets that have been hypothecated or encumbered have been considered at the book value for the purpose of computation of solvency margin. In this regard, it is hereby directed that:

I. Where the obligations for which the assets have been hypothecated or encumbered, have been recognized as liability in the books of accounts, the entire book value of the assets and liabilities shall be considered for the purpose of computation of solvency margin; and

II. Where the obligations for which the assets have been hypothecated or encumbered, have not been recognized as liability in the books of accounts, the entire book value of such hypothecated or encumbered assets shall not be considered for the purpose of computation of Available Solvency Margin.

3. It has also been observed that some insurers have considered intangibles assets, such as trademark or trade logo, as admissible asset for the purpose of computation of Available Solvency Margin. In this regard, it is hereby directed that such intangible assets shall be considered as Inadmissible for the purpose of computation of available solvency margin.

4. For the purpose of computation of Required Solvency Margin, it is hereby clarified that Personal Accident and Travel shall be clubbed with Health segment and RSM-1 and RSM-2 shall be computed accordingly;

5. It is hereby directed that the solvency returns shall be submitted within 45 days from the end of the quarter (for the quarters ending on June 30, September 30 and December 31) and within three months from the end of the period to which they refer to or within thirty days from the date of adoption of accounts by the Board of the insurer, whichever is earlier (for the quarter ending on March 31).

[Circular No. IRDA/F&A/CIR/MISC/082/05/2019]

Click here to download the Circular.

 


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