This article provides insights of the subject for the candidates appearing for Associateship (Non-Life) examination conducted by Insurance Institute of India. This exam basically deals with financial accounting and investment regulations.
With regards to financial accounting; candidates appearing for the IC 46 examination should be well versed with scope, concepts, principles & standards of accounting.
This subject intends to provide candidates; overview of Non-Life/General Insurance business accounting, methods, techniques & process. Besides investment accounting & regulations, IC 46 also deals with other important topics to study like aspects of International Financial reporting Standards (IFRS) & Internal Audit processes & techniques.
Insurance Accounting requires Compliance with requirements of Companies Act 1956, Insurance Act 1938 & guidelines & directives issued by Insurance Regulatory & Development Authority of India from time to time.
Let’s through light of Importance & functions of General Insurance Accounting
Importance of General Insurance Accounting:
- Accounting in a regularized manner help the Insurance Companies to communicate its financial results to various stakeholders including policy holders by means of financial statement.
- Insurance Companies presents annual report containing financial statements as required by Insurance Act & IRDAI regulations.
Functions of Accounting:
- Performance Analysis
- Accounting data for decision making
- Comparison of trend Analysis
- Compliance with Government regulations & taxations
It is important for candidates appearing for examination to be thorough with topics like; Importance of Accounting standards, Concepts & Principles of Accounting.
Let’s understand, “Accounting Principles” – It is a guide for selection of accounting procedures, which is based on certain standards or rules called as ‘Generally accepted accounting principles’ (GAAP). GAAP are guide to preparation of financial statements.
As per IRDAI regulations, following financial statements of General Insurance Companies are prepared;
- Balance Sheet
- Revenue Account
- Profit & Loss Accounts
- Cash flow statement
Students/Candidates appearing for IC 46 exam should also be well versed with all important aspects & understanding of Golden rules of Accounting, Accounting methods & Control and depreciation accounting.
Revenue account & underwriting results: The basic consideration of Insurance Companies is the underwriting result of its Insurance business. Revenue account determines Underwriting results & revenue account surplus after adjustment of Investment income on Policyholders fund.
IC 46 also deals with Insurance accounting regulations which provide that Insurance Companies carrying on Insurance business should comply with requirements of regulations.
Candidates appearing for IC 46 should also have knowledge on legal aspects of financial accounting. Legal aspects to accounts & audit of General Insurance companies are provided by;
- The Companies Act, 1956.
- The Insurance Act, 1938 & Insurance rules, 1939.
- IRDA Act, 1999.
- IRDA regulations on Accounts.
Reinsurance accounting is the major subject that IC 46 deals with & candidates appearing for exam are supposed to be well versed with this topic. Reinsurance accounting deals not only with financial aspects but also with technical & legal aspects of reinsurance.
Reinsurance accounting process & methods are based on class of insurance, types and methods of reinsurance, types of arrangement of treaties etc. Aspiring candidates should therefore need to be thoroughly familiar with fundamental aspects of various treaties like Quota Share, Surplus treaties, Excess of Loss treaties & their impact on reinsurance accounts.
Investment Accounting, Statutory Audit & Internal Audit in General Insurance business are other important topics dealt in IC 46.