16 A. SIGNIFICANT ACCOUNTING POLICIES
1. Accounting Convention
The Standalone financial statements are drawn up in
accordance with the provisions of Insurance Regulatory and
Development Authority (Actuarial, Finance and Investment
Functions of Insurers) Regulations, 2024 and circulars
and/or guidelines issued in the context of preparation of the
Standalone financial statements, and the provisions of the
Companies Act 2013. The said statements are prepared on
historical cost convention and on accrual basis and comply
with accounting standards specified under Companies
(Accounting Standards) Rules, 2021 read with Section
133 of Companies Act 2013, as amended and conform
to practices prevailing in the General Insurance industry
except as otherwise stated.
2. Use of estimates
The preparation of Standalone financial statements
in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amount of assets,
liabilities, revenues and expenses and disclosure of
contingent liabilities on the date of the Standalone financial
statements. Actual results may differ from those estimates
and assumptions. The estimates and assumptions used
in the accompanying Standalone financial statements
are based upon management's evaluation of the relevant
facts and circumstances as on the date of the Standalone
financial statements. Any revision to accounting estimates
is recognized prospectively in current and future periods.
3. Revenue Recognition
A. Premium
Premium income (other than received in instalments)
for other than long term policies is recognised on the
receipt of complete information, on commencement
of risk.
Premium income (other than received in instalments)
for policies issued on or after September 1,2018, for
Motor segment and on or after October 1, 2024 for
other than Motor segment pertaining to long term
policies (with term more than one year) is recognised
on the receipt of complete information, equally over
the policy period at the commencement of risk on
1/n basis where 'n' is a policy duration in years.
Balance premium for subsequent years is included
in the 'Premium Received in Advance'.
In the cases where premiums are received in
instalments, income is recognised on the receipt of
instalments.
In the cases where premium is sponsored by
Central / State Government, share of Central / State
Government is recognised on assumption of risk on
due basis.
In the cases of incoming coinsurance policies,
premium income is recognised on the receipt of
confirmation from the lead insurance company.
Reinsurance premium is recognized as per the
terms of the reinsurance contracts.
Any subsequent revisions to or cancellations of
premium are recognized in the year in which they
occur.
For all the above cases, a reserve for Unearned
Premium of recognised premium for each segment
is created as per the accounting policy for 'Reserves
for Un-expired Risk/s'.
B. Commission
Commission Income on reinsurance cessions
is recognized as income in the year in which
reinsurance premium is ceded.
Profit commission under reinsurance treaties
wherever applicable, is recognized on accrual.
Any subsequent revisions of profit commission are
recognized for in the year in which final determination
of the profits are intimated by reinsurers.
4. Premium Received in advance
Premium received in advance represents premium
received in respect of policies issued during the year,
where the risk commences subsequent to the Balance
Sheet date.
5. Reserves for Un-expired Risk/s
Unearned premium reserve is computed in accordance
with the guidelines issued by IRDAI as under:
a) Marine Hull: 100% of the Net Written premium
during the preceding twelve months;
b) In respect of other segments: on the basis of
1/365 method on contract period or period of risk
basis for the respective policies, whichever is
appropriate.
6. Reinsurance Accepted
Reinsurance returns have been incorporated for the
intimation/information received up to the cut-off date or
on estimation basis wherever required.
7. Reinsurance Ceded
Reinsurance cessions are accounted for on the basis of
actuals or on estimation basis wherever required.
8. Premium Deficiency
Premium deficiency is calculated where the sum of
expected claims costs, related expenses and maintenance
costs exceed the related unearned premium. The
premium deficiency is recognized as per IRDAI guidelines
and forms part of unexpired risk reserves.
9. acquisition Costs
Acquisition costs are primarily related to acquisition of
insurance contracts and have been expensed in the year
in which they are incurred.
10. Incurred Claims
Claims are recognized as and when reported. Claims
Paid (net of recoveries including salvages retained by
the insured, includes interest paid towards claims and all
expenses directly incurred in relation to their assessment)
are charged to respective revenue accounts.
Outstanding Claims at Balance Sheet date are provided
based on the management's assessment of the ultimate
liability based on survey reports, past experience,
information provided by clients and other sources, and
applicable laws and subsequently modified for changes
as appropriate on availability of further information and
includes:
• In respect of direct business, claim intimations
received up to the year-end;
• In respect of reinsurance accepted, advices received
as of different dates of subsequent year up to the
cut-off date or on estimation basis.
Provision for claims incurred but not reported (IBNR) and
provision for claims incurred but not enough reported
(IBNER); These provisions are determined by appointed
actuary, which is in accordance with generally accepted
actuarial practice, provisions of IRDAI (Actuarial, Finance
and Investment Functions of Insurers) Regulations 2024,
the master circulars issued in the context of preparation
of standalone financial statements and stipulations of the
Institute of Actuaries of India. (As amended from time to
time)
All the outstanding claims for direct business are provided
net of estimated salvage (if any).
In respect of motor third party claims where court
summons has been served on the Company without
adequate policy particulars to establish liability of the
Company, provision is made as under:
• 1/3rd of the estimated liability, for all such claims
for which court summons have been served on the
Company upto one year.
• 100% of the estimated liability, where such claims
are outstanding for more than one year.
Interest on motor accident claims tribunal (MACT) claims
is provided based on the prevailing trends in the motor
third party claim awards.
11. Salvage and Claim Recoveries
Recoveries of claims and sale proceeds on disposal of
salvage are accounted on realization and credited to
claims.
12. Receipt and Payment Account (Cash Flow Statement)
Receipt and Payment account/ Cash Flow Statement is
prepared as per Direct method as required by Part-II of
Schedule II of IRDAI (Actuarial, Finance and Investment
Functions of Insurers) Regulations, 2024.
13. Property, Plant and Equipment (Fixed Assets)
A) Property, Plant and Equipment (PPE)
i) PPE are stated at cost less depreciation.
Cost is inclusive of borrowing cost and other
incidental charges incurred up-to the date of
installation/put to use.
ii) Lease payment for assets taken on operating
lease are recognized as an expense in the
revenue(s) accounts and profit and loss
account over the lease term.
B) Depreciation
i) Depreciation on tangible assets is charged
on Straight Line Method (SLM) as per the
useful life prescribed under Schedule II of
the Companies Act 2013 and the residual
value of the asset shall be Re 1/- for Indian
Operations and unit 1/- in local reporting
currency for Foreign Operations.
ii) Lease hold properties are amortized over the
lease period.
iii) Depreciation on PPE added/disposed-off
during the year is provided on pro-rata basis.
iv) The residual value and useful lives are
reviewed at each financial year end.
14. Intangible Assets
Intangible assets are stated at cost of acquisition less
accumulated amortisation. The same is amortised over
a period of four years on straight line basis. Software
development / acquisition costs, except those which meet
the recognition criteria as laid down in Accounting Standard
26 (AS 26), are charged to revenue. Any additions to
already existing assets are amortised prospectively over
the remaining residual life of the assets.
15. Impairment of assets:
The PPE and Intangible assets are assessed for
any indication that an asset is impaired. In case the
recoverable amount of the fixed assets is lower than its
carrying amount, a provision is made for the impairment
loss.
16. Foreign Currency Transactions
a) Reinsurance operations:
Revenue transactions of re-insurance in foreign
currencies are converted at the average of buying
and selling rates of exchange of each quarter in
which they are accounted.
Monetary assets and liabilities of re-insurance in
foreign currencies are converted at the closing rate.
b) Foreign operations:
i) As per the Accounting Standard (AS) 11 “The
Effects of Changes in Foreign Exchange
Rates”, foreign branches/agencies are
classified as 'non-integral foreign operations'.
ii) The assets and liabilities (including
contingent liabilities), both monetary and
non-monetary items, of the non-integral
foreign operations are translated at the
closing rate.
iii) Income and expense items of the non¬
integral foreign operations are translated at
the average exchange rate of the year.
iv) Depreciation on fixed assets held in foreign
branches and agencies is provided on
straight line at the rate and in manner as
stated in “Depreciation” policy mentioned in
above stated Property, Plant and Equipment
Policy.
v) All resulting exchange difference is
accumulated in a foreign currency
translation reserve until the disposal of the
net investment in the foreign operations.
c) Foreign investments transactions during the year
are converted at the exchange rates prevailing as
on the last day of the month of purchase or sale.
d) Other assets and liabilities in foreign currencies are
converted at the average of buying and selling rates
of exchange prevailing at the year end.
e) The exchange gain/loss due to conversion of foreign
currencies other than relating to non-integral foreign
operations is taken to revenue(s) account and profit
and loss account as applicable.
17. Loans and Investments
a) Loans are measured at historical cost subject to
impairment. The Company reviews the quality of its
loan assets at every reporting period and provides
for impairment, if any.
b) Short Term Money Market Instruments such as
Commercial Papers and Certificate of Deposits are
shown at their discounted value and the difference
between the acquisition cost and the redemption
value is capitalised on time basis and recognised as
income.
c) Contracts for purchase and sale of shares, bonds,
debentures are accounted for as “Investments” as
on date of transaction.
d) The cost of investments includes premium on
acquisition, brokerage, transfer stamps, transfer
charges, Securities Transaction Tax and is net of
incentive/ fee if any, received thereon.
e) Dividend income (other than interim dividend):
Dividend Income is accounted for as income in the
year of declaration. Dividend on shares/interest
on debentures under objection/pending delivery
is accounted for on realisation. Interim dividend is
accounted for where the amount is received/credited
in the account of the company upto March 31.
Dividend on foreign investments is accounted on
gross basis.
f) Interest Income is recognized on accrual basis on
time proportion except income on non-performing
assets (NPA) which is recognized on realization
basis.
Amount received towards compensation for future
loss of interest is recognised as income only to
the extent attributable to the accounting year and
balance is kept in interest received in advance
account for apportionment in the relevant year.
g) Revenue in respect of Alternate Investment Fund/
Venture capital Fund, INVITs is recognized on
receipt basis.
h) Profit/Loss on realisation of investments is computed
by taking weighted average book value as cost of
investments except:
• In respect of Government Securities/
Debentures/Bonds under trading portfolio,
the profit/loss is worked out specific scrip
wise.
• In respect of Government Securities /
Debentures/Bonds and related debt
instruments sold from investment portfolio,
the profit/loss is worked out on first in first
out basis (FIFO).
i) The Company follows the prudential norms prescribed
by the Insurance Regulatory and Development
Authority as regards asset classification, recognition
of income and provisioning pertaining to loans/
advances/debentures.
j) Investment in government securities, debt securities
and redeemable preference shares are considered
as held till maturity and valued at cost. However, in
terms of Insurance Regulatory and Development
Authority Regulations the premium paid at the
time of acquisition of securities is amortised over
the residual period of maturity. In case investment
becomes NPA, the balance of unamortised premium
is debited to revenue(s) and profit and loss account
on the date of NPA.
k) i.) Investments in Mutual Funds are valued at
Net Asset Value (NAV) as at the Balance
Sheet date and the difference between
cost/book value and NAV is accounted in
Fair Value Change Account. In case of non¬
availability of latest NAV as at the Balance
Sheet date, investment is shown at cost.
ii.) Investments in Venture Funds are valued at
cost. If there is reduction in NAV, the same
is charged to revenue and book value of
investments is reduced accordingly. Any
appreciation in NAV to the extent of loss
earlier recognised, is taken to revenue.
Wherever NAV as on Balance Sheet date
is not available, latest available NAV is
considered.
l) (i) In accordance with IRDAI/F&I/INV/
CIR213/10/2013 dated October 30, 2013
for Valuation of Equity Portfolio, National
Stock Exchange (NSE) is considered as
Primary Stock Exchange and Bombay
Stock Exchange (BSE) as Secondary Stock
Exchange.
Investment Portfolio in respect of equity/
equity related instruments is segregated
into actively traded and thinly traded as
prescribed by Insurance Regulatory and
Development Authority of India (IRDAI)
Regulations.
(ii) Actively traded equity/ equity related
instruments are valued at the closing price at
NSE or if the scrip is not traded at NSE, the
scrip is valued at the closing price at BSE.
The difference between weighted average
cost and quoted value is accounted in Fair
Value Change Account.
Exchange traded funds & INVITs are
valued as applicable to Equity portfolio. The
difference between the weighted average
cost and the quoted value is accounted in
Fair Value change account.
(iii) Investments in equity shares of Companies
outside India are valued at the last quoted
price at the stock exchange of the respective
country.
m) Investment in thinly traded equity shares and
unlisted equity shares are shown at cost. Difference
between cost and break-up value is provided for as
diminution in value. If the break-up value is negative,
or break-up value is not available, then the provision
is made for the entire cost. Break-up value is arrived
as per latest Balance Sheet and which should not be
more than 24 months prior to its valuation.
n) In case of investment in listed and unlisted equity/
equity related instruments / preference shares where
the value has been impaired on or before March 31,
2000, the historical/weighted average costs are not
available with the Company. As a consequence,
the carrying value of such investments as on April
01,2000 is presumed to be the historical/ weighted
average cost.
o) Investments in equity/ equity related instruments/
preference shares made in those companies, which
are making losses continuously for last three years
and where capital is eroded (Break-up value is Less
than Face Value), are considered to have impairment
in value. Further, if the published accounts of a
Company are not available for last three accounting
years ending on or immediately preceding the date
of working out impairment in value, it is presumed
that the value of investment is fully impaired and is
written off to a nominal value of ?1/- per securities of
a Company.
p) Valuation of investments as mentioned in point (o)
above are done as under:
i) In respect of actively traded equity shares: -
At market price as follows:
• If Fair Value Change is positive,
then through Fair Value Change
Account.
• If Fair Value Change is negative,
then through Revenue Account.
ii) In respect of other than actively traded equity
shares: - lower of cost price or break-up
value provided break-up value is positive. If
break-up value is negative the nominal value
is taken at ?1/- per securities of a Company.
iii) In respect of preference shares, if the
dividend is not received for the last three
years, such preference shares are written
down to a value which will bear to its face
value, the same proportion as value taken/
which would have been taken for writing
down equity shares bears to the face value
of the equity shares. If the equity shares
are written down to ?1/- per securities of
a Company, preference shares are also
written down to a nominal value of ?1/- per
securities of a Company.
iv) Once the value of investment in equity/equity
related instruments/ preference shares of a
Company is impaired in accordance with
the above-mentioned policy, the reversal of
such impairment losses are recognized in
revenue/ profit and loss when such Company
achieves a positive net worth and capital is
fully restored (Break-up Value is More than
Face Value) as per the latest available
published accounts immediately preceding
the date of working out the reversal.
In respect of investments where the historical or
weighted average cost is not available as mentioned
in Policy No. 17(n), reversal of impairment loss is
carried out and recognized only to the extent of
impairment losses accounted after March 31, 2000.
q) Reverse Repo transactions are treated as secured
lending transactions and accordingly disclosed in
the Standalone financial statements. The difference
between total consideration at the 1st and 2nd leg of
the transaction is treated as interest income.
r) Tri Party Repo Dealing System (TREPS) & Treasury
Bills, which are issued at discount to the face
value, are treated as money market instrument
as per Reserve Bank of India notification. TREPS
are shown under Cash & Bank Balances. Discount
earned at the time of investment/lending in Money
Market Instruments is shown as income, which is
apportioned on time basis.
s) Un-realised gains / losses arising due to changes
in the fair value of actively traded listed equity
shares other than enumerated in Accounting Policy
17(n) are taken under the head “Fair Value Change
Account” and on realization reported in profit and
loss account.
Pending realization, the credit balance in the “Fair Value
Change Account” is not available for distribution to
shareholders/policyholders.
18. Employee Benefits
Employee benefits comprise of both defined contributions
and defined benefit plans.
Provident Fund is a defined contribution plan. The
Company's contribution towards provident fund is
charged to Revenue Accounts as applicable. Further the
Company has no further obligation beyond the periodic
contributions.
Pension, Gratuity and Leave Encashment are defined
benefit plans. The Company has incorporated a Pension
Trust and Gratuity Trust. The Company's liability towards
pension, gratuity and leave encashment is accounted for
on the basis of an actuarial valuation done at the year
end and is charged to revenue accounts as applicable.
In case of pension for the employee who joined from
April 01, 2010 contribution is made to National Pension
System (NPS) which is defined contribution plan wherein
contribution towards pension fund is charged to Revenue
accounts as applicable. The Company has no further
obligation beyond the periodic contributions.
All short-term employee benefits are accounted on
undiscounted basis during the accounting period based
on service rendered by the employees.
19. Segment Reporting:
The Company's primary reportable segments are business
segments, which have been identified in accordance with
AS 17 - Segment Reporting read with Part-II of Schedule
II of IRDAI (Actuarial, Finance and Investment Functions
of Insurers) Regulations, 2024. The income and expenses
attributable to the business segments are allocated as
mentioned in point no. 25 and 26 below.
20. Related Party Disclosure:
Related party identification and transactions are
disclosed as per the requirement of AS-18 “Related Party
Disclosures”.
21. operating lease:
The Rental in respect of operating lease is charged to
Revenue/Profit and Loss account.
22. Earnings per Share (EPS):
EPS (basic/diluted) is arrived at based on net profit after
taxation attributable to equity shareholders to the basic/
weighted average number of equity shares.
23. Taxation.
a) Tax expense for the year, comprises current tax and
deferred tax.
b) 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.
c) Minimum Alternative Tax (MAT) paid in accordance
with the tax laws, which gives rise to future economic
benefits in the form of adjustment of future income
tax liability, is considered as an asset if there is
convincing evidence that the Company will pay
normal income tax on future income. Accordingly,
MAT is recognized as an asset in the Balance sheet
when it is probable that the future economic benefit
associated with it will flow to the Company and the
asset can be measured reliably.
d) Deferred tax is recognized 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.
e) Deferred tax assets relating to unabsorbed
depreciation/business loss are recognized and
carried forward to the extent there is virtual certainty
that sufficient future taxable income will be available
against which such deferred tax assets can be
realized.
f) Deferred tax assets relating to other timing difference
are recognized and carried forward to the extent that
there is a reasonable certainty that sufficient future
taxable income will be available against which such
deferred tax assets can be realized.
g) Refund of income tax is accounted on realization
basis.
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