To

CEO’s of

All Life Insurance Companies

Re: Unit Linked Disclosure Norms

This is further to our letter no. 37/2/F&A/Circulars/146/JAN/2006-07 dtd 4 th January 2007 under the cover of which the Authority had circulated the draft of the guidelines for disclosure in respect of unit linked business which are to form part of the annual accounts of the insurance companies with effect from financial year 2006-07. The draft guidelines were circulated seeking comments of insurers.

The Authority has since examined the feedback received from the insurance companies. The format of reporting under the IRDA (Preparation of Financial Statements and Auditor’s report of Insurance Companies) Regulations, 2002 has been modified to ensure transparency and consistency in the disclosures across the industry.

As indicated earlier, the revised formats include the following:

1. Segregation of the Unit Linked Revenue A/c into two components, viz., (i) Non –Unit Funds and (ii) Unit Fund (which form Addendum to the Form A-RA);
2. Format of reporting of the Segregated funds – Revenue A/c, Balance Sheet and the underlying Schedules;
3. Additional disclosures to form part of the Annual Report.

In view of the queries raised by the insurers as to the manner of reporting further clarifications are being issued:

1. The Investment portion of premium shall be disclosed in the Unit segment and the non-investment portion in the non-unit segment;
2. Income on investment shall be disclosed under unit and non unit portion in consonance with (1) above;
3. Fees and charges shall be shown as “Income” in the non-unit segment and as “Expenses” in the unit segment.
4. All operating expenses and Commission shall be disclosed in non-unit segment
5. Claims arising from cancellation of units alone shall be shown against linked segment and other items like mortality, morbidity and value of guaranteed benefits shall be disclosed under non-unit segment

The above proposals are intended to further improve the quality of disclosures on ULIPs and are exclusively based upon the information already available and/or used for aggregation/compilation of the figures for the annual financial statements. The Authority therefore considers that the adoption of the revised formats do not pose any serious operational difficulty. It has therefore been decided that the insurers should comply with the above modifications w.e.f. the financial year ending March, 2007after effecting the necessary systems modifications.

Yours faithfully 

(C.S. Rao)