1. ACCOUNTING CONVENTION
The financial statements have been prepared and presented on a going concern basis in accordance with the provisions of
Section 11(1) of the Insurance Act, 1938 and to comply with the Generally Accepted Accounting Principles in India (Indian
GAAP), including the Accounting Standards notified under the relevant provisions of the Companies Act, 2013. The Financial
Statements also conform to the stipulation specified under the Insurance Regulatory and Development Authority of India
(Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024. The said statements are prepared on historical
cost convention and on accrual basis except as otherwise stated and conform to the statutory provisions and practices
prevailing in the General Insurance Industry in India.
2. REINSURANCE BUSINESS
2.1. Use of Estimates
The preparation of financial statements in conformity with the generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amount of assets and liabilities as of the Balance Sheet date,
revenue and expenses for the year ended and disclosure of contingent liabilities as of the Balance Sheet date. The estimates
and assumptions used in accompanying financial statements are based upon Management's evaluation of the relevant facts
and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions
used in preparing the accompanying financial statements. Any revision to accounting estimates is recognized prospectively
in current and future periods.
2.2. Reinsurance Revenues
Premium is accounted based on accounts rendered by ceding companies upon receipt of accounts. At the period end,
estimates are made for accounts not yet received, based on available information and current trends. In respect of Insurance
pool business, where GIC Re is one of the members of the Pool, only the Corporation's share of revenue is recorded in the
books of accounts.
2.3. Outstanding Claims
2.3.1. Estimated liability for outstanding claims in respect of Reinsurance business carried out in India is based on advice
received as of different dates up to the date of finalization of claim figures in the books for submission of the data to the
"Appointed Actuary" and wherever such advices are not received, on estimates based on available information, current
trends, past underwriting experience of the management and actuarial estimation bases.
2.3.2. Provision for claims Incurred But Not Reported (IBNR) is made as certified by the Appointed Actuary based on accepted
actuarial methods.
2.4. Receivables
Provisions for Doubtful Debts for receivables are provided as under:
(i) Companies in liquidation
(ii) Companies having non-moving balances over a period of 3 years
(iii) Companies having moving balances, apart from various parameters, has primarily outstanding dues more than 3 years:
The Provision for doubtful debts does not include Domestic Pools and Structured Quota share treaties.
3. FOREIGN CURRENCY TRANSACTIONS
Revenue transactions in foreign currencies are converted at the daily rate of exchange on the day accounts are received and
transactions are booked. The rates have been taken from Thomson Reuters India Pvt. Ltd.
3.1 Non-Monetary items including fixed assets and investments abroad are reported using the exchange rate applicable on the
date of acquisition.
3.2 Monetary items such as receivables, payables and balances in bank accounts held in foreign currencies are converted using
the closing rates of exchange at the balance sheet date.
3.3 The exchange gain/ loss relating to revenue transaction, due to conversion of foreign currencies, is accounted for as revenue in
respective revenue accounts. The common exchange gain/loss due to conversion are apportioned between Revenue Account
and Profit and Loss Account in same proportion as stated in Significant Accounting Policy No. 5.
3.4 Foreign branch operations are considered as "non-integral business" as prescribed in AS11 "The effects of changes in foreign
exchange rate (revised 2003)"and translated accordingly.
4. RESERVE FOR UNEXPIRED RISKS (URR)
The URR provisions are made as under:
4.1 Non-Life Business:
(i) For HO:
Reserve for Unexpired Risk in respect of Marine Insurance (Hull) and Terrorism Risk Business (included in Fire and
Engineering) is made at 100% of Net Premium, while for all other classes of insurance is made at 50% of Net Premium
of trailing 12 months other than Agriculture Insurance Business - Kharif (where premium is earned fully within the
accounting period).
(ii) London, Dubai, and Malaysia Branch:
Reserve for Unexpired Risk is provided as per local practice of respective countries. Adjustment for excess or short
provision in URR, as per IRDAI requirement, is accounted at Head Office.
4.2 Life Business:
Reserve for Unexpired Risk is provided as determined by Appointed Actuary based on accepted Actuarial methods.
5. APPORTIONMENT OF INTEREST, DIVIDEND AND RENT
The income from interest, dividends and rent is apportioned between Profit and Loss Account and Revenue Accounts in the
ratio of Shareholders' Fund and Policyholders' Fund respectively at the end of the period. The same is further apportioned
amongst the Revenue accounts on the basis of the respective Policyholder's fund at the end of the period.
Calculations of Shareholders' fund and Policyholders' fund is based on IRDAI circular IRDAI/ACTL/CIR/MISC/80/05/2024.
Shareholder's fund consists of share capital plus all Reserves and Surplus (except catastrophe reserve).
Policy holders fund for this purpose consists of estimated liability for outstanding claims including IBNR and IBNER, unexpired
risk reserve (URR), Premium deficiency (if any), catastrophe reserve (if any) and Other Liabilities net of Other Assets (relating to
policy holders) as per the guidelines of IRDAI.
6. FIXED ASSETS AND INTANGIBLES AND CWIP-SOFTWARE UNDER DEVELOPMENT
Fixed Assets:
Fixed assets are stated at cost less depreciation. Cost of shares in Co-operative Societies/Companies for property rights
acquired is included under the head 'Buildings' under Fixed Assets.
Tangible Fixed Assets are stated at cost (including incidental expenses relating to acquisition and installation) less accumulated
depreciation.
GST on capital assets is excluded in the acquisition cost of assets and Input Tax Credit for the same has been claimed as per
applicable GST laws.
Intangible Assets:
Intangible Fixed Assets representing software are recorded at its acquisition price and are amortized over their estimated
useful life on a straight-line basis, commencing from the date the assets are available for use. The management has estimated
the useful life for such software as five years. The useful life of the asset is reviewed by the management at each Balance Sheet
date. Intangible assets which are under development are capitalized only upon its completion.
Capital Work In Progress:
Capital work in progress includes assets not ready for the intended use and are carried at cost, comprising direct cost and
related incidental expenses.
6.1. Depreciation on Fixed Assets
Depreciation is provided on straight line method based on useful life of the assets as prescribed in Schedule II to the Companies
Act, 2013 and residual value of the assets shall be ?1/-.
Depreciation is provided on pro-rata basis on additions to fixed assets and on assets sold /discarded /demolished / destroyed
during the year.
All assets individually costing up to ?10,000 are fully depreciated in the period in which they are acquired.
6.2. Impairment of Assets
Fixed assets are reviewed for impairment at the end of the year whenever events or changes in circumstances warrant that
the carrying amount of an asset may not be recoverable. Recoverability of an asset to be held and used is measured by a
comparison of the carrying amount of an asset to future net discounted cash flows expected to be generated by the asset. If
such an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the asset exceeds the recoverable amount of the asset.
7. EMPLOYEE BENEFITS
Short term employee benefits
Employee benefits payable wholly within twelve months of rendering the service are classified as short term employee
benefits and are recognised in the period in which the employee renders the related service. All short term employee benefits
are accounted on undiscounted basis.
Long term employee benefits
These include Provident Fund, Gratuity, Leave Salary, Settlement and Pension. These are provided on the basis of actuarial
valuation including actuarial gains/losses at balance sheet date and is recognised in the revenue account(s) and profit and loss
account.
8. APPORTIONMENT OF EXPENSES
(i) Head office business:
Operating expenses relating to insurance business are apportioned to the Revenue Accounts on the basis of Reinsurance
Premium accepted during the period for which accounts are prepared, giving weightage of 75% for Marine business & 100 %
for Fire, Miscellaneous & Life Reinsurance business.
(ii) Foreign business:
Operating expenses relating to insurance business are also apportioned to the revenue accounts of branches on the same
basis as mentioned in 8 (i) above.
(iii) Investment Expenses:
Expenses relating to investment are apportioned between Revenue and Profit & Loss Account in the same proportion
as stated in Significant Accounting Policy No.5. Interest, Dividend and Rent income is net of Investment expenses. Refer
Note No. 13.
9. INVESTMENTS
9.1 Prudential norms prescribed by Reserve Bank of India and the IRDAI are followed in regard to:
(i) Revenue recognition
(ii) Classification of assets into performing and non-performing and
(iii) Provisioning against performing and non-performing assets.
9.2 Purchases and Sales of shares are accounted for on the date of contracts whereas bonds, debentures and Government
securities are accounted for on the date of settlement.
9.3 The cost of investments includes premium on acquisition, Securities Transaction Tax, Goods & Service tax and their related
expenses.
9.4 Short term money market instruments such as Triparty Repo (TREPS), Commercial Paper and Treasury bill,which are discounted
at the time of contract at the agreed rate are accounted at their discounted value.
9.5 Investment portfolio in respect of equity shares are segregated into actively traded and thinly traded as prescribed by the
IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024.
9.6 All investments are reviewed for impairment at the end of the Period whenever events or changes in circumstances warrant
that the carrying amount of an investment may not be recoverable. Basis the same, Impairment loss (i.e., other than temporary
diminution in value) is recognized over and above specific assessment-based impairment as required separately as per the
Significant Accounting Policies.
(a) Investment in actively traded equity shares are required to be valued as per the guidelines of IRDA issued vide circular
ref. no. IRDAI/ACTL/CIR/MISC/80/05/2024 dated May 17th, 2024 Master Circular on Actuarial, Finance and Investment
Functions of Insurers. The Corporation has chosen NSE as primary stock exchange and BSE as secondary exchange.
Accordingly, the valuation of equity shares is made at Fair Value being the closing price of NSE. If such security is not
listed / not traded on NSE on closing day, the closing price of BSE is considered.
(i) Provisioning for diminution in the value of Equity Shares/Preference shares :
Impairment loss (i.e., other than temporary diminution in value) is recognized in respect of an equity/preference
share which is actively traded in the stock exchange, and which has been held by the Corporation for a period of
more than three years, provided, the current average book value is more than the Fair value as on the Balance Sheet
date as well as persistently on previous three years from the Balance Sheet date.
Provision to the extent of difference between the re-measured fair value of the security/investment and its
acquisition cost as reduced by any previous impairment loss will be recognized as expense in the Profit and Loss
Account.
(b) Investment in units of mutual funds are valued at Fair value as per Master Circular Ref. no. IRDAI/ACTL/CIR/MISC/80/05/2024
dated May 17th, 2024 Master Circular on Actuarial, Finance and Investment Functions of Insurers. Fair value for this purpose
is the last quoted NAV as at the balance sheet date.
(c) In case of Equity Exchange Traded Funds (ETFs) the investment is valued on the same basis as traded equity shares,
whereas Passive ETFs shall be valued at Traded Price or at NAV as on the reporting date as per the Master circular
issued by IRDA on Actuarial, Finance and Investment functions of Insurers issued vide circular ref. no. IRDAI/ACTL/CIR/
MISC/80/05/2024 dated May 17th , 2024).
9.7 Unrealized Gains/Losses
(a) Unrealized gains/losses (excluding impairment loss of other than temporary diminution in value) arising due to changes
in the fair value of listed equity shares and mutual fund units are taken under the head "Fair Value Change Account" and
on realization reported in Profit and Loss Account.
(b) Pending realization, the credit balance in the "Fair Value Change Account" is not available for distribution.
(c) Provision is made for diminution in value of investments relating to thinly traded and unlisted shares equivalent to the
amount of difference in average book cost and breakup value of the shares except in companies where demerger has
taken place during the Financial Year and latest audited accounts are not available.
Breakup value is computed from the annual reports of companies not beyond 21 months irrespective of date of closure
of annual accounts of the companies.
(d) Provision is made for diminution in value of investment relating to units of venture capital funds equivalent to the
amount of difference in book cost and the latest Net Asset Value (NAV).
Companies whose latest available audited accounts are beyond 21 months irrespective of date of closure of annual accounts
of the companies as on the date of balance sheet or whose net worth has been fully impaired (negative net worth) are written
down to ?1/-.
9.9 Investments in Subsidiary and Associate Companies are valued at cost as these are strategic investments. Provision for
diminution in the value of these investments is made only if the decline is other than temporary.
9.10 Final Dividend is accounted for as income in the year of declaration and Interim dividend is accounted as income when the
amount is received or credited.
9.11 Dividends/Interest on shares/debentures under objection/pending deliveries is accounted for on realization/payment.
9.12 Profit or Loss on sale of investments is apportioned between Profit and Loss Account and Revenue Accounts in same proportion
as stated in Significant Accounting Policy No. 5.
Profit/Loss on sale of investments is computed at average book value of investments on the date of sale.
9.13 Expenses relating to safe custody, straight through processing and bank charges etc. on investments are charged to Profit and
Loss Account and Revenue Accounts as stated in Significant Accounting Policy No.8.
9.14 Debt securities including Government securities and Redeemable Preference shares have been considered as 'held to maturity'
securities and have been measured at historical cost subject to amortization of premium paid over residual period. The call
date has been considered as maturity date for amortization of Perpetual Bonds.
9.15 In case of Repos transaction, difference between the selling and buying value is treated as interest income.
9.16 Investments are apportioned between Shareholders' Fund & Policyholders' Fund basis ratio calculated as per IRDAI circular
IRDAI/ACTL/CIR/MISC/80/05/2024.
9.17 Investment in Units of "Real Estate Investment Trusts (REIT) & Infrastructure Investment Trusts (InvIT)"
The Investment in Units of REITs / InvITs shall be valued at Fair value being last quoted closing price ( should not be later
than 30 days) on the National Stock Exchange or in case these are not listed on National Stock Exchange, then based on the
last quoted price on the Bombay Stock Exchange. Where Market Quote is not available for the last 30 days, the Units shall be
valued as per the latest NAV (not more than 6 months old) of the Units published by the trust as per Master circular issued by
IRDA on Actuarial, Finance and Investment functions of Insurers issued vide circular Ref. no. IRDAI/ACTL/CIR/MISC/80/05/2024
dated May 17th, 2024.
9.18 Investments in Debt Securities of "Real Estate Investment Trusts (REIT) & Infrastructure Investment Trusts (InvIT)
The Investment in Debt Securities of InvITs / REITs shall be valued either as per FIMMDA or at applicable market yield rates
published by any Rating Agency registered with SEBI as per Master circular issued by IRDA on Actuarial, Finance and Investment
functions of Insurers issued vide circular Ref. no. IRDAI/ACTL/CIR/MISC/80/05/2024 dated May 17th, 2024.
9.19 Investment Classification: Investments maturing within twelve months from balance sheet date and investments made with
the specific intention to dispose off within twelve months are classified as 'short term investments'.
Investments other than 'short term investments' are classified as 'long term investments'
10. AMORTIZATION OF PREMIUM AND PROVISION FOR DOUBTFUL LOANS, INVESTMENTS & DEBTS
Amortization of premium, provision for doubtful loans, doubtful debts and diminution in the value of investments written off,
are recognized in the Profit & Loss account. Securities purchased at a discount are booked at the discounted price.
11. COMPLIANCE WITH ACCOUNTING STANDARDS
The Corporation has complied with relevant accounting standards prescribed under Section 133 of the Companies Act, 2013
(the Act), read with the Companies (Accounting Standards) Rules, 2014, to the extent applicable and IRDAI guidelines in
preparation of its financial statements.
12. PREMIUM DEFICIENCY RESERVE(PDR)
Non-Life Business:Wherever applicable, Premium deficiency is worked out separately for each segmental revenue level basis
viz. Fire, Marine and Miscellaneous. As per IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024,
dated 20th March 2024, PDR is calculated by Non-Life Appointed Actuary.
Life Re business:As per IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 dated
20th March 2024, PDR is calculated by Life Re Appointed Actuary.
13. DEFERRED COMMISSION
London BO has accounted for deferred commission as per the local laws. The same is accounted as Commission at Head Office,
in compliance to IRDAI requirements.
14. TAXATION
Current tax
The Company provides for income tax on the basis of taxable income for the current accounting period in accordance with the
provisions of the Income Tax Act, 1961.
Current income tax expense comprises taxes on income from operations in India and in foreign jurisdiction. Income tax
payable in India is determined in accordance with the provisions of the Income Tax Act 1961. Tax expense relating to foreign
operations is determined in accordance with tax laws applicable in countries where such operations are domiciled.
Interest on Refund of income tax is accounted on realization basis.
Deferred tax
Deferred tax assets and liabilities are recognised on timing differences between the accounting income and the taxable
income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the Balance Sheet date.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future,
however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are
recognised only if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet
date and appropriately adjusted to reflect the amount that is reasonably/virtually certain to be realised.
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