To
The CEOs of
All Insurers and Re-insurer
Dear Sir/Madam,
IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations, 2000
The Authority had vide Circular No. 045/IRDA/F&A/MAR-06 dated 31 st March, 2006 on the said subject.
At Para 2 (Valuation of Assets) of the Circular, attention was drawn to Schedule I of the Regulations under reference. Clause 2 (3) of the Regulations which provides that all assets of an insurer, other than those specified at (1) and (2), have to be valued in accordance with the IRDA (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002.
It was clarified that as a matter of prudence and also consistent with the requirement of section 64 V (1) (i) of the Insurance Act, 1938 which states that “assets shall be valued at values not exceeding their market or realizable values”, for the purpose of computation of solvency margin, debt securities shall be valued at lower of the amortized cost and the market value.
It would be recalled that these clarifications were given, with the intent of aligning the statutory and regulatory requirements in valuation of debt securities and make it effective from the year ended 31 st March, 2006 onwards. However, in view of certain difficulties expressed by the insurers in ensuring compliance with the requirements as stipulated in Section 64 V (1) (i) of the Insurance Act, 1938 , the requirement had been kept in abeyance for the financial years 2005-06 and 2006-07.
In view of the requests received from the insurance companies in ensuring compliance with the stipulations as indicated in the Circular under reference, the Authority has taken a decision to defer the implementation of the directive for one more financial year 2007-08. The instructions would, therefore, be made applicable effective financial year 2008-09.
Yours faithfully,
(C. R. Murlidharan)
Member