Audit Of Insurance Companies Flashcards
Various types of insurance business with minimum requirements under sec 6
Life insurance, general insurance or health insurance - minimum paid up equity share is 100 CR
Re insurer - minimum paid up equity capital 200 CR and net worth. It less than 5000 CR
Appointment of auditor of insurance company
General insurance corporation of India and its subsidiaries, divisions and branches - C&AG
Remaining shall be appointed as per companies act
Maximum insurance companies is 3 , but not more than 2 general or 2 life (joint audit is mandatory)
Sufficiency of asset and solvency margin us 64A
Requirement. Of solvency margin (50% of assets over liabilities of the amount of minimum capital required under sec 6 )
Non compliance to solvency margin (wind up)
Power of authority to prescribe solvency (control level)
Submission of financial plan
Modification of financial plan
Non submission of financial plan
Audit procedures of PREMIUMS
Internal control over issue of policy, stamp, stationery etc
Document verification
Premium revenue recognition based upon risk pattern established by insurance company
Co insurance premium recognition as per agreement (premium is received by lead co insurance and distributed )
Premium commission to re insurer
Verifying agency commission
Refund of premium and propionate recovery of commission from agent
Accounting and taxation effect
CLAIMS PAID
Sanctioning of claim
Whether apportionment of claim is as per co insurance agreement
In case of reinsurance whether claim is BIENG communicated to reinsurer and whether amount is received or shown as receivables
Salvage value recovered
Full provision for litigated claims
Acknowledgement from claimant for amount received and unqualified discharge note for claims fully settled
Claims provisions
Date of loss is important, date of communication is not important
Provision is made only for the legally enforceable claims (risk was covered, occurred during the period when company was liable)
Provision is not in excess of amount insured
Amount shall also include fees of loss surveyor and other expenses
Events after bs is being considered
Average clause is BIENG applied in case of under insurance
In case of co insurance provision for only his own share
Operating expenses
Expenses broadly classified into 13 heads
First all the expenses is BIENG aggregated and then apportioned to the revenue account of each class of business
Clearly indicate the basis of apportionment of these to accounts
Any major expenses (5lacs or 1% of net premium weh) are required to be shown separately
Expenses which do not have any direct relation be shown separately in profit and loss account (not to be shown in revenue accounts)
Receipt and payment account
Report that receipt and payment account is in agreement with books of accounts and returns
Express an opinion that r&p account is being prepared in accordance with provisions of relevant statutes
Express an opinion that it gives true and fair view of receipts and payments of the insurer for the period under audit
Reinsurance inward
Internal control systemic ke Guidelines and procedures Premium received or commission paid Claims regularly accounted Foreign principle insurer Balance confirmation Individual a/c review
Reinsurance outward
Internal control systems if Guidelines and procedures Examine premium paid Commission received Loss of recovered has been claimed Foreign reinsurers Written confirmation Review individual account
Incoming co insurance
Premium account credited on basis of statement received from lead insurer
If not received the premium is accounted on the basis of advices to ensure that all premium in respect of risk assumed in any year is booked in the respective year
Communication in the post audit period and obtain written communication that all advices has been recorded
Verify claims and claims provisions with advice received from lead insurer
Outgoing co insurance
Scrutinize the outgoing business
Relevant risk assumed under the policies
