The Hindu Business Line : Disclosures by insurers must have more details: IRDA

Hyderabad, Oct. 8 The proposed guidelines for public disclosures by insurers will offer policy holders and investors insights into the financial health of their insurer.

Life and non-life insurance companies will have to disclose details such as break-up of impaired assets across different classes, rating distribution of the debt investment portfolio, incurred and cumulative net losses, among others, according to the Insurance Regulatory and Development Authority (IRDA).

Disclosure details

In its draft guidelines announced on Thursday, the regulator said details such as notional and fair value on various derivative instruments entered into along with the accounting practice followed, basis of valuation of investment, pension and post-retirement obligations, five-year historical data for key financial parameters, should be disclosed by the insurers.

Highlighting the importance of quarterly disclosures, IRDA said the quarterly reports should go beyond the financial performance.

“They should capture aspects such as policy lapses, break-up and performance of investment portfolio and liquidity profile of the company,” it said.

RISK EXPOSURE

The guidelines also mandate that insurers provide detailed write-ups on actuarial assumptions, exposure to riskier sectors, solvency margins (capital adequacy). A periodic stress-testing of the key assumptions in product pricing and its impact on liquidity and solvency is also suggested.

The disclosures could be grouped into company and investment profile, liability valuation, risk concentration, solvency and business statistics. While the regulator has been receiving some portions of disclosures mentioned in the draft guidelines, it also proposed additional disclosures, namely sensitivity, related party transactions and reinsurance risk concentration.

May allow IPO

Observing that public disclosures would become vital even for the unlisted companies as they would help judge the risk by the policy-holders, among others, IRDA also hinted at the possibility of permitting the insurance companies to go for initial public issue. “In a few months, several companies will complete 10 years of existence after which they may be allowed by the regulator to go for an IPO,” it said.

The guidelines have been put on IRDA Web site for feedback, which should be sent by October 25. IRDA plans to implement the guidelines with effect from November 1.

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