ICAI PLANNING SPECIFIC ACCOUNTING STANDARDS FOR INSURANCE SE

shailesh agarwal (professional accountant)   (7642 Points)

14 May 2009  

 

ICAI PLANNING SPECIFIC ACCOUNTING STANDARDS FOR INSURANCE SECTOR

The accounting regulator the Institute of Chartered Accountants of India (ICAI) has constituted an expert group to suggest sector-specific accountingnorms for insurance companies. The move aims at ensuring that financial statements of insurance firms reflect true natures of financial arrangements. ICAI president Uttam Prakash Agarwal confirmed the development. “ICAI is planning to come up with specificaccounting standards for the insurance sector,”. 

New standards will help in makingfinancial statements of insurance companies — public as well as private — easier for the investors to comprehend, as it will require the companies to show their fields of revenue generation with clarity, he said. These independent accounting standards for the country’s insurance sector will be in addition to the already existing accounting norms which the insurance companiesfollows now. 

The insurance regulator, Insurance Regulatory Development Authority (Irda) has directed all domestic life insurance companies to tighten their expenses in order to procure durable business. This move came after reports surfaced that insurers are making disproportionately huge commission payments to their intermediaries, other than individual agents. This, in turn, affects the overall financial strength of the companies. 

The definition of related parties to intermediaries should be conformity with theaccounting standards of ICAI and Companies Act. The regulator has also stipulated that the information certificate given by the company to the regulator should have signatures of the insurer’s chief executive officer, the chief financial officer and thecompliance officer.