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Insurance 1 PDF

The document outlines regulatory requirements for insurance companies in India including maintaining minimum paid up equity capital, appointment of auditors, and solvency margin requirements. It also discusses trade credit insurance which protects suppliers from losses due to non-payment by buyers. Finally, it describes methods of reinsurance including facultative and treaty reinsurance as well as proportional and non-proportional treaty types such as quota share, surplus, excess of loss, and stop loss treaties.

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Anil S Chaudhary
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65 views2 pages

Insurance 1 PDF

The document outlines regulatory requirements for insurance companies in India including maintaining minimum paid up equity capital, appointment of auditors, and solvency margin requirements. It also discusses trade credit insurance which protects suppliers from losses due to non-payment by buyers. Finally, it describes methods of reinsurance including facultative and treaty reinsurance as well as proportional and non-proportional treaty types such as quota share, surplus, excess of loss, and stop loss treaties.

Uploaded by

Anil S Chaudhary
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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AUDIT OF INSURANCE CO.

A. Regulatory Requirements:

Registration Under IRDA Regulations,2000


Minimum Paid up Equity LIC - 100 cr
capital Health Insurance - 100 cr
Reinsurance - 200 cr

Appointment of Auditor LIC – by CAG


Other – at AGM after ensuring compliance by auditor
Audit Auditor can conduct Audit of max 3 co. out of which
LIC = max 2
GIC = max 2

Solvency Margin 1. Insurer & Reinsurer shall maintain Value of Assets > Liabilities
(not less than 50% of minimum capital)
2. If failed, Authority shall specify level of solvency margin as
Control Level of Solvency (CLS)
3. If defaulted in CLS, submit a Financial Plan to authority
indicating action to correct deficiency
4. If fails to follow direction, order of WU can be passed

Unexpired Risk Reserve As at year end, all the policies do not expire, therefore there is need
to maintain URR for unexpired risk liability
Creation of minimum URR
Marine hull Insurance = 100% of net premium
Fire/ Marine cargo/ Misc. = 50% of net premium

B. Trade Credit Insurance:


1. It protects supplier from losses due to non-payment of goods/Services by the buyers.
2. If buyer doesn’t Pay/ Pays late, Trade Credit Insurance policy will pay a % of o/s debt.
3. Requirements:
 Loss arises due to Non-payment of T/R
 Buyer is liable to pay to policyholder
 Premium for policy has been paid
 Other Requirements specified by Authority,
METHODS OF RE INSURANCE

A. FACULTATIVE METHOD:
Insurance of Particular Risk at Particular Time. It is used when:
1. Risk is non standardised
2. Insurer has no automatic cover
3. Automatic cover is exhausted
4. Technical guidance is required at each stage of accepting risk
5. Suitable for Emergent situations
B. TREATY REINSURANCE
Reinsurer agrees to undertake risk within prescribed period of time

Proportional Treaty Reinsurance:


Premium /losses are shared on the basis of agreed proportion.
Quota Share Treaty: It is also known as Fixed share treaty. A fixed share/quota of risk
is reinsured in this method.
Surplus Treaty Ceding co. first decides its risk bearing capacity, then excess risk
is referred to reinsurance.
Pool 2 or more insurers creates a pool to cover larger risks by
entering into agreement.

Non-Proportional Treaty Reinsurance:


Reinsurer will get involved only when loss exceed a specified amount
Excess of Loss Treaty: Original insurer bears loss up to certain limit and excess is borne
by reinsurer.
Excess of loss cover on - when several risks are affected as a result of an event
Prevent basis: - Underlying limit is applied to each risk to determine
liability

Excess of loss cover on - when several risks are affected as a result of an event
Non- prevent basis - Aggregate amount is determined
- Underlying limit is deducted from aggregate amount to
determine liability
Stop loss Treaty It protects co. from losing more than specified amount

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