Financial Daily from THE HINDU group of publications
Thursday, Jun 10, 2004
Financial Daily from THE HINDU group of publications Thursday, Jun 10, 2004 |
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Money & Banking
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Life Insurance IRDA cautions insurers on bonus practices Our Bureau
Hyderabad , June 9 THE Insurance Regulatory and Development Authority (IRDA) has cautioned life insurance companies against the practice of declaring bonus to policyholders except out of an actuarial surplus following valuation. In a circular to the life insurance companies, the regulator said the surplus should not be increased by contributions out of any reserve fund or otherwise unless they were brought in through the revenue account on or before the date of the valuation. The insurance watchdog said it has observed that life insurance companies were taking recourse to shareholders' funds in different ways to enable declaration of bonus to participating policyholders. According to the IRDA circular, the insurer should make good the accumulated deficit in the policyholders' account and transfer adequate assets to cover the cost of bonus prior to declaration of bonus to the participating policyholders. The regulator said such transfer should be authorised through a special resolution of the shareholders at the general meeting of the insurer and should be irreversible and be fully backed by transfer of assets and investments to the policyholders' funds. They should also be adequate to meet the policyholders' liabilities, including the cost of bonus, the circular said. Further, IRDA has asked the insurers to appropriately increase the paid-up equity capital following the transfer of assets and investments. The regulator has also asked the insurers to ensure that the proposed rates of bonus be sustainable over the future. IRDA has directed those life insurance companies, who have not conformed to the requirements laid down on bonus, to ensure compliance with retrospective effect while finalising their accounts for the financial year 2003-04.
More Stories on : Life Insurance | Regulatory Bodies & Rulings
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