Insurance Companies- Accounting and Statutory Requirements -ICICI Lombard

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INTRODUCTION
Insurance is the equitable transfer of the risk of a loss, from one entity to another in
exchange for payment. It is a form of risk management primarily used to hedge against the
risk of a contingent, uncertain loss. An insurer, or insurance carrier, is a company selling the
insurance; the insured, or policyholder, is the person or entity buying the insurance policy.
The amount of money to be charged for a certain amount of insurance coverage is called the
premium. Risk management, the practice of appraising and controlling risk, has evolved as a
discrete field of study and practice.
The transaction involves the insured assuming a guaranteed and known relatively small loss
in the form of payment to the insurer in exchange for the insurer's promise to compensate
(indemnify) the insured in the case of a financial (personal) loss. The insured receives a
contract, called the insurance policy, which details the conditions and circumstances under
which the insured will be financially compensated.
Insurance in India refers to the market for insurance in India which covers both the public
and private sector organisations. It is listed in the Constitution of India on the in the Seventh
Schedule meaning it can only be legislated by the central government.
The insurance sector has gone through a number of phases by allowing private companies to
solicit insurance and also allowing foreign direct investment. India allowed private
companies in insurance sector in 2000, setting a limit on FDI to 26%, which was increased to
49% in 2014. However, the largest life-insurance company in India, Life Insurance
Corporation of India is still owned by the government and carries a sovereign guarantee for
all insurance policies issued by it.

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HISTORY
In India, insurance has a deep-rooted history. Insurance in various forms has been mentioned
in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and Kautilya
(Arthashastra). The fundamental basis of the historical reference to insurance in these ancient
Indian texts is the same i.e. pooling of resources that could be re-distributed in times of
calamities such as fire, floods, epidemics and famine. The early references to Insurance in
these texts have reference to marine trade loans and carriers' contracts.
Insurance in its current form has its history dating back until 1818, when Oriental Life
Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of
European community. The pre-independence era in India saw discrimination between the
lives of foreigners (English) and Indians with higher premiums being charged for the latter.
In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer.
At the dawn of the twentieth century, many insurance companies were founded. In the year
1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate
the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the
premium-rate tables and periodical valuations of companies should be certified by an actuary.
However, the disparity still existed as discrimination between Indian and foreign companies.
The oldest existing insurance company in India is the National Insurance Company,
which was founded in 1906, and is still in business.
The Government of India issued an Ordinance on 19 January 1956 nationalizing the Life
Insurance sector and Life Insurance Corporation came into existence in the same year. The
Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75
provident societies—245 Indian and foreign insurers in all. In 1972 with the General
Insurance Business (Nationalization) Act was passed by the Indian Parliament, and
consequently, General Insurance business was nationalized with effect from 1 January 1973.
107 insurers were amalgamated and grouped into four companies, namely National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd
and the United India Insurance Company Ltd. The General Insurance Corporation of India
was incorporated as a company in 1971 and it commence business on 1 January 1973.

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The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private
sector. Before that, the industry consisted of only two state insurers: Life Insurers (Life
Insurance Corporation of India, LIC) and General Insurers (General Insurance Corporation of
India, GIC). GIC had four subsidiary companies. With effect from December 2000, these
subsidiaries have been de-linked from the parent company and were set up as independent
insurance companies: Oriental Insurance Company Limited, New India Assurance Company
Limited, National Insurance Company Limited and United India Insurance Company
Limited.

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LEGAL STRUCTURE
The insurance sector went through a full circle of phases from being unregulated to
completely regulated and then currently being partly deregulated. It is governed by a number
of acts.
The Insurance Act of 1938 was the first legislation governing all forms of insurance to
provide strict state control over insurance business. Life insurance in India was completely
nationalized on 19 January 1956, through the Life Insurance Corporation Act. All 245
insurance companies operating then in the country were merged into one entity, the Life
Insurance Corporation of India.
The General Insurance Business Act of 1972 was enacted to nationalize about 100 general
insurance companies then and subsequently merging them into four companies. All the
companies were amalgamated into National Insurance, New India Assurance, Oriental
Insurance and United India Insurance, which were headquartered in each of the four
metropolitan cities. Until 1999, there were no private insurance companies in India. The
government then introduced the Insurance Regulatory and Development Authority Act in
1999, thereby de-regulating the insurance sector and allowing private companies.
Furthermore, foreign investment was also allowed and capped at 26% holding in the Indian
insurance companies.
In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on
par with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects
and Company Secretaries. A minimum capital of US$80 million (Rs.400 Crore) is required
by legislation to set up an insurance business.
AUTHORITIES
The primary regulator for insurance in India is the Insurance Regulatory and Development
Authority (IRDA) which was established in 1999 under the government legislation called the
Insurance Regulatory and Development Authority Act, 1999.
The industry recognises examinations conducted by IAI (for actuaries), III (for agents,
brokers and third-party administrators) and IIISLA (for surveyors and loss assessors). TAC is
the sole data repository for the non-life industry. IBAI gives voice for brokers while GI

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Council and LI Council are platforms for insurers. AIGIEA, AIIEA, AIIEF, AILICEF,
AILIEA, FLICOA, GIEAIA, GIEU and NFIFWI cater to the employees of the insurers. In
addition, there are a dozen Ombudsman offices to address client grievances.
PRINCIPLES
Insurance involves pooling funds from many insured entities (known as exposures) to pay for
the losses that some may incur. The insured entities are therefore protected from risk for a
fee, with the fee being dependent upon the frequency and severity of the event occurring. In
order to be an insurable risk, the risk insured against must meet certain characteristics.
Insurance as a financial intermediary is a commercial enterprise and a major part of the
financial services industry, but individual entities can also self-insure through saving money
for possible future losses.
INSURABILITY
Risk which can be insured by private companies typically shares seven common
characteristics:
1. Large number of similar exposure units: Since insurance operates through pooling
resources, the majority of insurance policies are provided for individual members of
large classes, allowing insurers to benefit from the law of large numbers in which
predicted losses are similar to the actual losses. Exceptions include Lloyd's of
London, which is famous for insuring the life or health of actors, sports figures, and
other famous individuals. However, all exposures will have particular differences,
which may lead to different premium rates.
2. Definite loss: The loss takes place at a known time, in a known place, and from a
known cause. The classic example is death of an insured person on a life insurance
policy. Fire, automobile accidents, and worker injuries may all easily meet this
criterion. Other types of losses may only be definite in theory. Occupational disease,
for instance, may involve prolonged exposure to injurious conditions where no
specific time, place, or cause is identifiable. Ideally, the time, place, and cause of a

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loss should be clear enough that a reasonable person, with sufficient information,
could objectively verify all three elements.
3. Accidental loss: The event that constitutes the trigger of a claim should be fortuitous,
or at least outside the control of the beneficiary of the insurance. The loss should be
pure, in the sense that it results from an event for which there is only the opportunity
for cost. Events that contain speculative elements, such as ordinary business risks or
even purchasing a lottery ticket, are generally not considered insurable.
4. Large loss: The size of the loss must be meaningful from the perspective of the
insured. Insurance premiums need to cover both the expected cost of losses, plus the
cost of issuing and administering the policy, adjusting losses, and supplying the
capital needed to reasonably assure that the insurer will be able to pay claims. For
small losses, these latter costs may be several times the size of the expected cost of
losses. There is hardly any point in paying such costs unless the protection offered has
real value to a buyer.
5. Affordable premium: If the likelihood of an insured event is so high, or the cost of
the event so large, that the resulting premium is large relative to the amount of
protection offered, then it is not likely that the insurance will be purchased, even if on
offer. Furthermore, as the accounting profession formally recognizes in financial
accounting standards, the premium cannot be so large that there is not a reasonable
chance of a significant loss to the insurer. If there is no such chance of loss, then the
transaction may have the form of insurance, but not the substance (see the U.S.
Financial Accounting Standards Board pronouncement number 113: "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts").
6. Calculable loss: There are two elements that must be at least estimable, if not
formally calculable: the probability of loss, and the attendant cost. Probability of loss
is generally an empirical exercise, while cost has more to do with the ability of a
reasonable person in possession of a copy of the insurance policy and a proof of loss
associated with a claim presented under that policy to make a reasonably definite and
objective evaluation of the amount of the loss recoverable as a result of the claim.
7. Limited risk of catastrophically large losses: Insurable losses are ideally
independent and non-catastrophic, meaning that the losses do not happen all at once
and individual losses are not severe enough to bankrupt the insurer; insurers may
prefer to limit their exposure to a loss from a single event to some small portion of
their capital base. Capital constrains insurers' ability to sell earthquake insurance as

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well as wind insurance in hurricane zones. In the United States, flood risk is insured
by the federal government. In commercial fire insurance, it is possible to find single
properties whose total exposed value is well in excess of any individual insurer's
capital constraint. Such properties are generally shared among several insurers, or are
insured by a single insurer who syndicates the risk into the reinsurance market.
LEGAL
When a company insures an individual entity, there are basic legal requirements and
regulations. Several commonly cited legal principles of insurance include:
1. Indemnity – the insurance company indemnifies, or compensates, the insured in the
case of certain losses only up to the insured's interest.
2. Benefit insurance – as it is stated in the study books of The Chartered Insurance
Institute, the insurance company doesn't have the right of recovery from the party who
caused the injury and is to compensate the Insured regardless of the fact that Insured
had already sued the negligent party for the damages (for example, personal accident
insurance)
3. Insurable interest – the insured typically must directly suffer from the loss. Insurable
interest must exist whether property insurance or insurance on a person is involved.
The concept requires that the insured have a "stake" in the loss or damage to the life
or property insured. What that "stake" is will be determined by the kind of insurance
involved and the nature of the property ownership or relationship between the
persons. The requirement of an insurable interest is what distinguishes insurance from
gambling.
4. Utmost good faith – (Uberrima fides) the insured and the insurer are bound by a good
faith bond of honesty and fairness. Material facts must be disclosed.
5. Contribution – insurers which have similar obligations to the insured contribute in the
indemnification, according to some method.
6. Subrogation – the insurance company acquires legal rights to pursue recoveries on
behalf of the insured; for example, the insurer may sue those liable for the insured's
loss. The Insurers can waive their subrogation rights by using the special clauses.
7. Causa proxima, or proximate cause – the cause of loss (the peril) must be covered
under the insuring agreement of the policy, and the dominant cause must not be
excluded

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8. Mitigation – In case of any loss or casualty, the asset owner must attempt to keep loss
to a minimum, as if the asset was not insured.
INDEMNIFICATION
To "indemnify" means to make whole again, or to be reinstated to the position that one was
in, to the extent possible, prior to the happening of a specified event or peril. Accordingly,
life insurance is generally not considered to be indemnity insurance, but rather "contingent"
insurance (i.e., a claim arises on the occurrence of a specified event). There are generally
three types of insurance contracts that seek to indemnify an insured:
1. A "reimbursement" policy
2. A "pay on behalf" or "on behalf of" policy
3. An "indemnification" policy
From an insured's standpoint, the result is usually the same: the insurer pays the loss and
claims expenses.
If the Insured has a "reimbursement" policy, the insured can be required to pay for a loss and
then be "reimbursed" by the insurance carrier for the loss and out of pocket costs including,
with the permission of the insurer, claim expenses.
Under a "pay on behalf" policy, the insurance carrier would defend and pay a claim on behalf
of the insured who would not be out of pocket for anything. Most modern liability insurance
is written on the basis of "pay on behalf" language which enables the insurance carrier to
manage and control the claim.
Under an "indemnification" policy, the insurance carrier can generally either "reimburse" or
"pay on behalf of", whichever is more beneficial to it and the insured in the claim handling
process.
An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.)
becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means
of a contract, called an insurance policy. Generally, an insurance contract includes, at a
minimum, the following elements: identification of participating parties (the insurer, the
insured, the beneficiaries), the premium, the period of coverage, the particular loss event

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covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in
the event of a loss), and exclusions (events not covered). An insured is thus said to be
"indemnified" against the loss covered in the policy.
When insured parties experience a loss for a specified peril, the coverage entitles the
policyholder to make a claim against the insurer for the covered amount of loss as specified
by the policy. The fee paid by the insured to the insurer for assuming the risk is called the
premium. Insurance premiums from many insured’s are used to fund accounts reserved for
later payment of claims – in theory for a relatively few claimants – and for overhead costs. So
long as an insurer maintains adequate funds set aside for anticipated losses (called reserves),
the remaining margin is an insurer's profit.

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TYPES OF INSURANCE
Any risk that can be quantified can potentially be insured. Specific kinds of risk that may
give rise to claims are known as perils. An insurance policy will set out in detail which perils
are covered by the policy and which are not. Below are non-exhaustive lists of the many
different types of insurance that exist. A single policy may cover risks in one or more of the
categories set out below. For example, vehicle insurance would typically cover both the
property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from
an accident). A home insurance policy in the United States typically includes coverage for
damage to the home and the owner's belongings, certain legal claims against the owner, and
even a small amount of coverage for medical expenses of guests who are injured on the
owner's property.
Business insurance can take a number of different forms, such as the various kinds of
professional liability insurance, also called professional indemnity (PI), which are discussed
below under that name; and the business owner's policy (BOP), which packages into one
policy many of the kinds of coverage that a business owner needs, in a way analogous to how
homeowners' insurance packages the coverages that a homeowner needs.
AUTO INSURANCE
Auto insurance protects the policyholder against financial loss in the event of an incident
involving a vehicle they own, such as in a traffic collision.
Coverage typically includes:
 Property coverage, for damage to or theft of the car
 Liability coverage, for the legal responsibility to others for bodily injury or property
damage
 Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost
wages and funeral expenses

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HEALTH INSURANCE
Health insurance policies cover the cost of medical treatments. Dental insurance, like medical
insurance, protects policyholders for dental costs. In most developed countries, all citizens
receive some health coverage from their governments, paid for by taxation. In most countries,
health insurance is often part of an employer's benefits.
ACCIDENT, SICKNESS, AND UNEMPLOYMENT INSURANCE
Workers' compensation, or employers' liability insurance, is compulsory in some countries
 Disability insurance policies provide financial support in the event of the policyholder
becoming unable to work because of disabling illness or injury. It provides monthly
support to help pay such obligations as mortgage loans and credit cards. Short-term
and long-term disability policies are available to individuals, but considering the
expense, long-term policies are generally obtained only by those with at least six-
figure incomes, such as doctors, lawyers, etc. Short-term disability insurance covers a
person for a period typically up to six months, paying a stipend each month to cover
medical bills and other necessities.
 Long-term disability insurance covers an individual's expenses for the long term, up
until such time as they are considered permanently disabled and thereafter. Insurance
companies will often try to encourage the person back into employment in preference
to and before declaring them unable to work at all and therefore totally disabled.
 Disability overhead insurance allows business owners to cover the overhead expenses
of their business while they are unable to work.
 Total permanent disability insurance provides benefits when a person is permanently
disabled and can no longer work in their profession, often taken as an adjunct to life
insurance.
 Workers' compensation insurance replaces all or part of a worker's wages lost and
accompanying medical expenses incurred because of a job-related injury.

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CASUALTY
Casualty insurance insures against accidents, not necessarily tied to any specific property. It
is a broad spectrum of insurance that a number of other types of insurance could be classified,
such as auto, workers compensation, and some liability insurances.
 Crime insurance is a form of casualty insurance that covers the policyholder against
losses arising from the criminal acts of third parties. For example, a company can
obtain crime insurance to cover losses arising from theft or embezzlement.
 Political risk insurance is a form of casualty insurance that can be taken out by
businesses with operations in countries in which there is a risk that revolution or other
political conditions could result in a loss.
LIFE
Life insurance provides a monetary benefit to a decedent's family or other designated
beneficiary, and may specifically provide for income to an insured person's family, burial,
funeral and other final expenses. Life insurance policies often allow the option of having the
proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. In most
states, a person cannot purchase a policy on another person without their knowledge.
Annuities provide a stream of payments and are generally classified as insurance because
they are issued by insurance companies, are regulated as insurance, and require the same
kinds of actuarial and investment management expertise that life insurance requires.
Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against
the possibility that a retiree will outlive his or her financial resources. In that sense, they are
the complement of life insurance and, from an underwriting perspective, are the mirror image
of life insurance.
Certain life insurance contracts accumulate cash values, which may be taken by the insured if
the policy is surrendered or which may be borrowed against. Some policies, such as annuities
and endowment policies, are financial instruments to accumulate or liquidate wealth when it
is needed.
In many countries, such as the United States and the UK, the tax law provides that the interest
on this cash value is not taxable under certain circumstances. This leads to widespread use of

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life insurance as a tax-efficient method of saving as well as protection in the event of early
death.
In the United States, the tax on interest income on life insurance policies and annuities is
generally deferred. However, in some cases the benefit derived from tax deferral may be
offset by a low return. This depends upon the insuring company, the type of policy and other
variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g.,
IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation.
PROPERTY
This tornado damage to an Illinois home would be considered an "Act of God" for insurance
purposes
Property insurance provides protection against risks to property, such as fire, theft or weather
damage. This may include specialized forms of insurance such as fire insurance, flood
insurance, earthquake insurance, home insurance, inland marine insurance or boiler
insurance. The term property insurance may, like casualty insurance, be used as a broad
category of various subtypes of insurance, some of which are listed below:
US Airways Flight 1549 was written off after ditching into the Hudson River
 Aviation insurance protects aircraft hulls and spares, and associated liability risks,
such as passenger and third-party liability. Airports may also appear under this
subcategory, including air traffic control and refuelling operations for international
airports through to smaller domestic exposures.
 Boiler insurance (also known as boiler and machinery insurance, or equipment
breakdown insurance) insures against accidental physical damage to boilers,
equipment or machinery.
 Builder's risk insurance insures against the risk of physical loss or damage to property
during construction. Builder's risk insurance is typically written on an "all risk" basis
covering damage arising from any cause (including the negligence of the insured) not
otherwise expressly excluded. Builder's risk insurance is coverage that protects a
person's or organization's insurable interest in materials, fixtures and/or equipment

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being used in the construction or renovation of a building or structure should those
items sustain physical loss or damage from an insured peril.
 Crop insurance may be purchased by farmers to reduce or manage various risks
associated with growing crops. Such risks include crop loss or damage caused by
weather, hail, drought, frost damage, insects, or disease.
 Earthquake insurance is a form of property insurance that pays the policyholder in the
event of an earthquake that causes damage to the property. Most ordinary home
insurance policies do not cover earthquake damage. Earthquake insurance policies
generally feature a high deductible. Rates depend on location and hence the likelihood
of an earthquake, as well as the construction of the home.
 Fidelity bond is a form of casualty insurance that covers policyholders for losses
incurred as a result of fraudulent acts by specified individuals. It usually insures a
business for losses caused by the dishonest acts of its employees.
Hurricane Katrina caused over $80 billion of storm and flood damage
 Flood insurance protects against property loss due to flooding. Many U.S. insurers do
not provide flood insurance in some parts of the country. In response to this, the
federal government created the National Flood Insurance Program which serves as the
insurer of last resort.
 Home insurance, also commonly called hazard insurance or homeowners insurance
(often abbreviated in the real estate industry as HOI), provides coverage for damage
or destruction of the policyholder's home. In some geographical areas, the policy may
exclude certain types of risks, such as flood or earthquake that require additional
coverage. Maintenance-related issues are typically the homeowner's responsibility.
The policy may include inventory, or this can be bought as a separate policy,
especially for people who rent housing. In some countries, insurers offer a package
which may include liability and legal responsibility for injuries and property damage
caused by members of the household, including pets.
 Landlord insurance covers residential and commercial properties which are rented to
others. Most homeowners' insurance covers only owner-occupied homes.
 Marine insurance and marine cargo insurance cover the loss or damage of vessels at
sea or on inland waterways, and of cargo in transit, regardless of the method of transit.
When the owner of the cargo and the carrier are separate corporations, marine cargo

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insurance typically compensates the owner of cargo for losses sustained from fire,
shipwreck, etc., but excludes losses that can be recovered from the carrier or the
carrier's insurance. Many marine insurance underwriters will include "time element"
coverage in such policies, which extends the indemnity to cover loss of profit and
other business expenses attributable to the delay caused by a covered loss.
 Supplemental natural disaster insurance covers specified expenses after a natural
disaster renders the policyholder's home uninhabitable. Periodic payments are made
directly to the insured until the home is rebuilt or a specified time period has elapsed.
 Surety bond insurance is a three-party insurance guaranteeing the performance of the
principal.
The demand for terrorism insurance surged after 9/11
 Terrorism insurance provides protection against any loss or damage caused by
terrorist activities. In the United States in the wake of 9/11, the Terrorism Risk
Insurance Act 2002 (TRIA) set up a federal program providing a transparent system
of shared public and private compensation for insured losses resulting from acts of
terrorism. The program was extended until the end of 2014 by the Terrorism Risk
Insurance Program Reauthorization Act 2007 (TRIPRA).
 Volcano insurance is a specialized insurance protecting against damage arising
specifically from volcanic eruptions.
 Windstorm insurance is an insurance covering the damage that can be caused by wind
events such as hurricanes..

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INSURANCE ACT, 1938
SEPARATION OF ACCOUNTS AND FUNDS
10. (1) Where the insurer carries on business of more than one of the following classes,
namely, life insurance, fire insurance, marine insurance or miscellaneous insurance, he shall
keep a separate account of all receipts and payments in respect of each such class of
insurances business and where the insurer carries on business of miscellaneous insurance
whether alone or in conjunction with business of another class, he shall, unless the Authority
waives this requirement in writing, keep a separate account of all receipts and payments in
respect of each of such sub-classes of miscellaneous insurance business as may be prescribed
in this behalf:
Provided that no sub-class of miscellaneous insurance business shall be prescribed under this
sub-section if the insurance business comprised in the sub-clause consist of insurance
contracts which are terminable by the insurer at intervals not exceeding twelve months and
under which, if a claim arises, the insurer's liability to pay benefit ceases within one year of
the date on which the claim arose.
(2) Where the insurer carries on the business of life insurance all receipts due in respect of
such business, shall be carried to and shall form a separate tuna to be called the life insurance
fund the assets of which shall, after the expiry of six months from the commencement of the
Insurance (Amendment) Act, 1946 (6 of 1946), be kept distinct and separate from all other
assets of the insurer and the deposit made by the insurer in respect of life insurance business
shall be deemed to be part of the assets of such fund; and every insurer shall, within the time
limited in sub-section (1) of section 15 in regard to the furnishing of the statements and
accounts referred to in section 11, furnish to the Authority a statement showing in detail such
assets as at the close of every calendar year duly certified by an auditor or by a person
qualified to audit under the law of the insurer's country:
Provided that such statement shall, in the case of an insurer to whom section 11 applies, be
set out as a part of the balance-sheet mentioned in clause (a) of sub-section (1) of that section:
Provided further that an insurer may show in such statement all the assets held in his life
department, but at the same time showing any deductions on account of general reserves and
other liabilities of that department:

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Provided also that the Authority may call for a statement similarly certified of such assets as
at any other date specified by him to be furnished within a period of three months from the
date with reference to which the statement is called for
(2A) No insurer carrying on life insurance business shall be entitled to be registered for any
class of insurance business in addition to the class or classes for which he has been already
registered unless the Authority is satisfied that the assets of the life insurance fund of the
insurer are adequate to meet all his liabilities on policies of life insurance maturing for
payment.
(3) The life insurance fund shall be as absolutely the security of the life policy-holders as
though it belonged to an insurer carrying on no other business than life insurance business
and shall not be liable for any contracts of the insurer for which it would not have been liable
had the business of the insurer been only that of life insurance and shall not be applied
directly or indirectly for any purposes other than those of the life insurance business of the
insurer.
ACCOUNTS AND BALANCE-SHEET
11. (1) Every insurer, in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b)
of clause (9) of section 2 in respect of all insurance business transacted by him, and in the
case of any other insurer in respect of the insurance business transacted by him in India, shall
at the expiration of each financial year prepare with reference to that year,— (a) in
accordance with regulations contained in part I of the First Schedule, a balance-sheet in the
form set forth in Part II of that Schedule; (b) in accordance with the regulations contained in
part I of the Second Schedule, a profit and loss account in the forms set forth in Part II of that
Schedule, except where the insurer carries on business of one class only of the following
classes, namely, life insurance, fire insurance or marine insurance and no other business;
(c) in respect of each class or sub-class of insurance business for which he is required under
sub-section (1) of section 10 to keep a separate account of receipts and payments, a revenue
account in accordance with the Regulations, and in the form or forms, set forth in the Third
Schedule applicable to that class or sub-class of insurance business.
(1A) Notwithstanding anything contained in sub-section (1), every insurer, on or after the
commencement of the Insurance Regulatory and Development Authority Act,1999, in respect
of insurance business transacted by him and in respect of his shareholders’ funds, shall, at the
expiration of each financial year, prepare with reference to that year, a balance-sheet, a profit

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and loss account, a separate account of receipts and payments, a revenue account in
accordance with the regulations made by the Authority.
(1B) Every insurer shall keep separate accounts relating to funds of shareholders and policy-
holders.
(2) Unless the insurer is a company, as defined in clause (2) of sub-section (1) of Section 2 of
the Indian Companies Act, 1913 (7 of 1913), the accounts and statements referred to in sub-
section (1) shall be signed by the insurer, or in the case of a company by the chairman, if any,
and two directors and the principal officer of the company, or in the case of a firm by two
partners of the firm, and shall be accompanied by a statement containing the names,
descriptions and occupations of, and the directorships held by, the persons in charge of the
management of business during the period to which such accounts and statements refer and
by a report on the affairs of the business during that period.
(3) Where an insurer carrying on the business of insurance at the commencement of this Act
has prepared the balance-sheet and accounts required by the Indian Life Assurance
Companies Act, 1912 (6 of 1912), or has based his accounts upon the financial and not the
calendar year, the provisions of this section shall, if the Central Government so directs in any
case, apply until the 31st day of December, 1939, as if in sub-section (1) references to the
calendar year were references to the financial year.
AUDIT
12. The balance-sheet, profit and loss account, revenue account and profit and loss
appropriation account of every insurer, in the case of an insurer specified in sub-clause (a)(ii)
or sub-clause (b) of clause (9)of section 2 in respect of all insurance business transacted by
him, and in the case of any other insurer in respect of the insurance business transacted by
him in India, shall, unless they are subject to audit under the Indian Companies Act, 1913 (7
of 1913), be audited annually by an auditor, and the auditor shall in the audit of all such
accounts have the powers of, exercise the functions vested in, and discharge the duties and be
subject to the liabilities and penalties imposed on, auditors of companies by section 145 of
the Indian Companies Act, 1913.
REGISTER OF POLICIES AND REGISTER OF CLAIMS
14. Every insurer, in the case of an insurer specified in sub-clause (a)(ii) or sub-clause (b) of
clause (9) of section 2 in respect of all business transacted by him, and in the case of any

19
other insurer in respect of the insurance business transacted by him in India, shall maintain-
(a) a register or record of policies, in which shall be entered, in respect of every policy issued
by the insurer, the name and address of the policy-holder, the date when the policy was
effected and a record of any transfer, assignment or nomination of which the insurer has
notice, and (b) a register or record of claims, in which shall be entered every claim made
together with the date of the claim, the name and address of the claimant and the date on
which the claim was discharged, or, in the case of a claim which is rejected, the date of
rejection and the grounds there for.
INVESTMENT OF ASSETS
27. (1) Every insurer shall invest and at all times keep invested assets equivalent to not less
than the sum of- (a) the amount of his liabilities to holders of life insurance policies in India
on account of matured claims, and (b) the amount required to meet the liability on policies of
life insurance maturing for payment in India, less- (i) the amount of premiums which have
fallen due to the insurer on such policies but have not been paid and the days of grace for
payment of which have not expired, and
(ii) any amount due to the insurer for loans granted on and within the surrender values of
policies of life insurance maturing for payment in India issued by him or by an insurer whose
business he has acquired and in respect of which he has assumed liability, in the manner
following, namely, twenty-five per cent of the said sum in Government securities, a further
sum equal to not less than twenty-five per cent of the said sum in Government securities or
other approved securities and the balance in any of the approved investments specified in
sub-section (1) of section 27A or, subject to the limitations, conditions and restrictions
specified in sub-section (2) of that section, in any over investment.
(2) For the purposes of subsection (1),—
(a) the amount of any deposit made under section 7 or section 98 by the insurer in respect of
his life insurance business shall be deemed to be assets invested or kept invested Government
securities;
(b) the securities of, or guaranteed as to principal and interest by, the Government of the
United Kingdom shall be regarded as approved securities other than Government securities
for a period of four years from the commencement of the Insurance (Amendment) Act, 1950
(47 of 1950), in the manner and to the extent herein after specified, namely:—
(i) During the first year, to the extent of twenty-five per cent in value of the sum referred to in
sub-section (1);

20
(ii) During the second year, to the extent of eighteen and three fourths per cent in value of the
said sum;
(iii) During the third year, to the extent of twelve and a half per cent in value of the said sum;
and
(iv) During the fourth year, to the extent of six and a quarter per cent in value of the said sum:
Provided that, if the Authority so directs in any case, the securities specified in clause (b)
shall be regarded as approved securities other than Government securities for a longer period
than four years, but not exceeding six years in all and the manner in which and the extent to
which the securities shall be so regarded shall be as specified in the direction;
(c) Any prescribed assets shall, subject to such conditions, if any, as may be prescribed, be
deemed to be assets invested or kept invested in approved investments specified in sub-
section (1) of section 27A.
(3) In computing the assets referred to in subsection (1),—
(a) any investment made with reference to any currency other than the Indian rupee which is
in excess of the amount required to meet the liabilities of the insurer in India with reference
to that currency, to the extent of such excess; and
(b) Any investment made in the purchase of any immoveable property outside India or on the
security of any such property, shall not be taken into account:
Provided that nothing contained in this sub-section shall affect the operation of sub-section
(2): Provided further that the Authority may, either generally or in any particular case, direct
that any investment, whether made before or after the commencement of the Insurance
(Amendment) Act, 1950 (47 of 1950), and whether made in or outside India, shall, subject to
such conditions as may be imposed, be taken into account, in such manner as may be
specified in computing the assets referred to in sub-section (1) and where any direction has
been issued under this proviso copies thereof shall be laid before Parliament as soon as may
be after it is issued.
(4) Where an insurer has accepted reassurance in respect of any policies of life insurance
issued by another insurer and maturing for payment in India or has ceded reassurance to
another insurer in respect of any such policies issued by himself, the sum referred to in
subsection (1) shall be increased by the amount of the liability involved in such acceptance
and decreased by the amount of the liability involved in such cession.
(5) The Government securities and other approved securities in which assets are under sub-
section (1) to be invested and kept invested shall be held by the insurer free of any
encumbrance, charge, hypothecation or lien.

21
(6) The assets required by this section to be held invested by an insurer incorporated or
domiciled outside India shall, except to the extent of any part thereof which consists of
foreign assets held outside India, be held in India and all such assets shall be held in trust for
the discharge of the liabilities of the nature referred to in sub-section (1) and shall be vested
in trustees resident in India and approved by the Authority, and the instrument of trust under
this sub-section shall be executed by the insurer with the approval of the Authority and shall
define the manner in which alone the subject-matter of the trust shall be dealt with.
Explanation.—this sub-section shall apply to an insurer incorporated India whose share
capital to the extent of one-third is owned by, or the members of whose governing body to the
extent of one-third consists of, members domiciled elsewhere than in India.
FURTHER PROVISIONS REGARDING INVESTMENTS.
27-B. (1) No insurer carrying on general insurance business shall, after the commencement of
the Insurance
(Amendment) Act, 1968 (62 of 1968), invest or keep invested any part of his asset otherwise
than in any of the following approved investments, namely:
(a) The investment specified in clauses (a) to (e), (n), (q) and (r) of sub-section (1) of
Sec.27A;
(b) debentures secured by a first charge on any immoveable property, plant or equipment of
any company which has paid interest in full for the three years immediately preceding or for
at least three out of the four or five years immediately preceding on such or similar
debentures issued by it;
(c) debentures secured by a first charge on any immoveable property, plant or equipment of
any company where either the book value or the market value, whichever is less, of such
property, plant or equipment is more than twice the value of such debentures;
(d) first debentures secured by a floating charge on all its assets or by a fixed charge on fixed
assets and floating charge on all other assets of any company which has paid dividends on its
equity shares for the three years immediately preceding or for at least three out of the four or
five years immediately preceding the date of the investment;
(e) preference shares of any company which has paid dividends on its equity shares for the
three years immediately preceding or for at least three out of the four or five years
immediately preceding;
(f) preference shares of any company on which dividends have been paid for the three years
immediately preceding or for at least three out of the four or five years immediately

22
preceding and which have priority in payment over all the equity shares of the company in
winding up;
(g) shares of any company which have been guaranteed by another company, such other
company having paid dividends on its equity shares for the three years immediately
preceding or for at least three out of the four or five years immediately preceding:
Provided that the total amount of shares of all the companies under - that guarantee by the
guaranteeing company is not in excess of fifty percent. of the paid-up amount of preference
and equity shares of the guaranteeing company;
(h) shares of any company on which dividends of not less than four per cent including bonus
have been paid for the three years immediately preceding or for at least three out of the four
or five years immediately preceding;
(i) First mortgages on immoveable proper situated in India or in any other country where the
insurer is carrying on insurance business:
Provided that the property mortgaged is not lease-hold property with an outstanding term of
less than fifteen years and the value of the property exceeds by one-third, or if it consists of
buildings, exceeds by on-half, the mortgage money;
(j) Such other investments as the Authority may, by notification in the Official Gazette,
declare to be approved investments for the purposes of this section.
PROHIBITION OF PAYMENT BY WAY OF COMMISSION OR OTHERWISE FOR
PROCURING BUSINESS
40. (1) No person shall after the expiry of six months from the commencement of this Act,
pay or contract to pay any remuneration or reward whether by way of commission or
otherwise for soliciting or procuring insurance business in India to any person except an
insurance agent or an intermediary or insurance intermediary.
(1A) In this section and section 40A, 41 and 43 references to an insurance agent shell be
construed as including references to an individual soliciting or procuring insurance business
exclusively in the territories which Immediately before the 1st November, 1956 were
comprised in a Part B State notified in this behalf by the Central Government in the Official
Gazette and holding a valid licence as an insurance agent under the law of that Part B State.
(2) No insurance agent shall be paid or contract to be paid by way of commission or as
remuneration in any form an amount exceeding, in the case of life insurance business, forty
per cent of the first year’s premium payable on any policy or policies effected through him

23
and five per cent of a renewal premium, payable on such a policy, or, in the case of business
of any other class, fifteen per cent of the premium:
Provided that insurers in respect of life insurance business only may pay during the first ten
years of their business to their insurance agents fifty-five per cent of the first years premium
payable on any policy or policies effected through them and six per cent of the renewal
premiums payable on such policies:
Provided further that nothing in this sub-section shall apply in respect of any policy of life
insurance issued after the 31st day of December, 1950, or in respect of any policy of general
insurance issued after the commencement of the Insurance (Amendment) Act, 1950 (47 of
1950).
(2A) Save as hereinafter provided, no insurance agent or intermediary or insurance
intermediary shall be paid or contract to be paid by way of commission or as remuneration in
any form any amount in respect of any policy not effected through him:
Provided that where a policy of life insurance has lapsed and it cannot under the terms and
conditions applicable to it be revived without further medical examination of the person
whose life was insured thereby, an insurer, after giving by notice in writing to the insurance
agent through whom the policy was effected if such agent continues to be an agent of the
insist an opportunity to effect the revival of the policy within a time specified in the notice,
being not less than one month from the date of the receipt by him of the notice, may pay to
another insurance agent who effects the revival of the policy an amount calculated at a rate
not exceeding half the rate of commission at which the agent through whom the policy was
effected would have been paid had the policy not lapsed, on the sum payable on revival of the
policy on account of arrear premiums (excluding any interest on such arrear premiums) and
also on the subsequent renewal premiums payable on the policy.
(3) Nothing in this section shall prevent the payment under any contract existing prior to the
27th day of January, 1937, of gratuities or renewal commission to Many person, whether an
insurance agent within the meaning of this Act or not, or to his representatives after his
decease in respect of insurance business effected through him before the said date.

24
IRDA REGULATIONS FOR FINANCIAL STATEMENTS
The Insurance Regulatory and Development Authority (Preparation of Financial Statements
and Auditor’s Report of Insurance Companies) Regulations, 2002, provides that-
1) An insurer carrying on life insurance business shall comply with the requirements of Schedule
A.
2) An insurer carrying on general insurance business shall comply with the requirements of
Schedule B. This sub-regulation shall apply, mutandis, to reinsurers, until separate regulations
are made.
3) The report of the auditors on financial statements of every insurer and reinsurer shall be in
conformity with the requirements of Schedule C, or as near thereto as the circumstances
permit.

25
GENERAL INSURANCE
General insurance or non-life insurance policies, including automobile and homeowners
policies provide payments depending on the loss from a particular financial event. General
insurance is typically defined as any insurance that is not determined to be life insurance. It is
called property and casualty insurance in the U.S. and Canada and Non-Life Insurance in
Continental Europe.
TYPES OF GENERAL INSURANCE
PERSONAL INSURANCE
Personal insurance is essentially a plan availed by and individual to take care of various
requirements like health and coverage against death or injury by accident. there are several
policies nowadays where there is an option to cover the family members in and individual
policy.
The different types of personal insurance may be mentioned as well:
MEDICAL INSURANCE
Medical or health insurance is taken to cover against the chances of medical costs. These
plans are created with the estimates of healthcare expenses a person may face in future and
the premiums are determined on such approximations.
ACCIDENTAL INSURANCE
The accidental insurance policies cover both death and any sort of disability arising from an
accident. These plans cover a wide range of situations but not ones arising from using alcohol
or drugs.
PROPERTY INSURANCE
Property insurance provides coverage against risks to property arising from fire, weather
damage, or theft to name a few. this type of insurance can be further sub divided into fire
insurance, earthquake insurance, flood insurance, and boiler insurance for example. The
standard fire and special perils, policy of SBI General Insurance is one of the major examples
of such a policy.

26
FIRE INSURANCE
Insurance that is used to cover damage to a property caused by fire. Fire insurance is a
specialized form of insurance beyond property insurance, and is designed to cover the cost of
replacement, reconstruction or repair beyond what is covered by the property insurance
policy. Policies cover damage to the building itself, and may also cover damage to nearby
structures, personal property and expenses associated with not being able to live in or use the
property if it is damaged
Homeowners and property owners may consider fire insurance in addition to a property
insurance policy if the property contains valuable items. A best practice would be to
document the property and its related contents, which makes identifying the value of items
damaged or lost much easier after a fire has taken place. A fire insurance policy may contain
exclusions based on the cause of the fire, such as not covering fires caused by wars.
VEHICLE INSURANCE
Vehicle insurance is also referred to as auto insurance, car insurance, GAP insurance, and
motor insurance. It is primarily bought for securing road vehicles such as cars, motorcycles,
and trucks from physical damage from traffic accidents as well as any liability that may rise
thereafter.
RURAL INSURANCE
Rural insurance is meant to cater to the requirements of rurally bases business or individuals.
These policies provide a wide range of coverage starting from life and health to protection
against natural disasters that can have a negative effect on business.
INDUSTRIAL INSURANCE
The insurance policies are availed by various companies to get protection for important
projects, contracts, and equipment from situations like fire, theft and any form of damage or
loss.
COMMERCIAL INSURANCE
Commercial insurance is availed in order to get security against theft, liability, and property
damage. These plans help in cases of employee injuries and business interruption.

27
MARINE INSURANCE
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or
cargo by which property is transferred, acquired, or held between the points of origin and
final destination. Cargo insurance — discussed here — is a sub-branch of marine insurance,
though Marine also includes Onshore and Offshore exposed property, (container terminals,
ports, oil platforms, pipelines), Hull, Marine Casualty, and Marine Liability. When goods are
transported by mail or courier, shipping insurance is used instead.
Specialist policies
Various specialist policies exist, including:
 New building risks: This covers the risk of damage to the hull while it is under
construction.
 Open Cargo or Shipper’s Interest Insurance: This policy may be purchased by a
carrier, freight broker, or shipper, as coverage for the shipper’s goods. In the event of
loss or damage, this type of insurance will pay for the true value of the shipment,
rather than only the legal amount that the carrier is liable for.
 Yacht Insurance: Insurance of pleasure craft is generally known as "yacht insurance"
and includes liability coverage. Smaller vessels such as yachts and fishing vessels are
typically underwritten on a "binding authority" or "line slip" basis.
 War risks: General Hull insurance does not cover the risks of a vessel sailing into a
war zone. A typical example is the risk to a tanker sailing in the Persian Gulf during
the Gulf War. The war risks areas are established by the London-based Joint War
Committee, which has recently moved to include the Malacca Straits as a war risks
area due to piracy. If an attack is classified as a "riot" then it would be covered by
war-risk insurers.
 Increased Value (IV): Increased Value cover protects the ship owner against any
difference between the insured value of the vessel and the market value of the vessel.
 Overdue insurance: This is a form of insurance now largely obsolete due to
advances in communications. It was an early form of reinsurance and was bought by
an insurer when a ship was late at arriving at her destination port and there was a risk
that she might have been lost (but, equally, might simply have been delayed). The
overdue insurance of the Titanic was famously underwritten on the doorstep of
Lloyd's.

28
 Cargo insurance: Cargo insurance is underwritten on the Institute Cargo Clauses,
with coverage on an A, B, or C basis, A having the widest cover and C the most
restricted. Valuable cargo is known as specie. Institute Clauses also exist for the
insurance of specific types of cargo, such as frozen food, frozen meat, and particular
commodities such as bulk oil, coal, and jute. Often these insurance conditions are
developed for a specific group as is the case with the Institute Federation of Oils,
Seeds and Fats Associations (FOFSA) Trades Clauses which have been agreed with
the Federation of Oils, Seeds and Fats Associations and Institute Commodity Trades
Clauses which are used for the insurance of shipments of cocoa, coffee, cotton, fats
and oils, hides and skins, metals, oil seeds, refined sugar, and tea and have been
agreed with the Federation of Commodity Associations.

29
ICICI LOMBARD
ICICI Lombard General Insurance Company Limited is a joint venture between ICICI
Bank Limited, India's second largest bank with total assets of over USD 99 billion at 31
March 2014 and Fairfax Financial Holdings Limited, a Canada based USD 37 billion
diversified financial services company engaged in general insurance, reinsurance, insurance
claims management and investment management. ICICI Lombard GIC Ltd. is the largest
private sector general insurance company in India with a Gross Written Premium (GWP) of
Rs 71.34 billion for the year ended 31 March 2014. The firm offers policy issuance and
renewal through its website. It markets assurance products including Car Insurance, Health
Insurance, International Travel Insurance, Overseas Student Travel Insurance, Two Wheeler
Insurance, and Home Insurance. ICICI Lombard has 221 branches spread across the nation.
ICICI Lombard is a 74:26 joint venture between ICICI Bank Limited, India's second largest
bank with USD 99 billion in assets and Fairfax Financial Holdings Limited, a Canada based
USD 37 billion diversified financial services company engaged in general insurance,
reinsurance, insurance claims management and investment management.
HISTORY
Established in 2001, ICICI Lombard General Insurance Company is a joint venture between
ICICI Bank- India’s largest private bank and Fairfax financial Holdings Limited- financial
Services Company based in Toronto. ICICI bank has 74% stake in the venture while Fairfax
has the rest in the venture. ICICI Lombard General Insurance is the largest private sector
general insurance company in India and has been accredited with iAAA rating by ICRA for
four years (2006, 2007, 2008, and 2010).
PRODUCT AND SERVICES
 ICIC Lombard Health Insurance
 ICICI Lombard Overseas Student Medical Insurance
 International Travel insurance
 ICICI Lombard Home Insurance
 ICICI Lombard Car Insurance

30
AWARDS
ICICI Lombard received the highest rating in terms of overall customer satisfaction as well as
‘The Most Recommended Company’ in a 2013 survey to assess Customer satisfaction and
Quality of Health insurance in India, commissioned by Dept. of Consumer Affairs, Ministry
of Consumer Affairs.
The company has also been conferred the "ASTD BEST Award 2012" for Learning and
Development, "Porter Prize 2012" for creating Shared Value, "Golden Peacock Award 2012"
for Corporate Social Responsibility and "Golden Peacock Innovation Award-2010" for
Rashtriya Swasthya Bima Yojana. It also received the "Product of the Year" award in the
General Insurance category for FY 2012-13 and was voted the No 1 Health Insurance Product
in a survey of 18,000 people over 23 cities in India, a study done by Nielsen. The company
has been conferred with 'Celent Asia Insurance Technology Award 2012' under the category
Best Mobile Applications.
Claims Leader - General Insurance – Fintelekt - June 2014

31
FINANCIAL STATEMENTS
Balance SheetatMarch31, 2014
(`in000’s)
Particulars schedules AtMarch31,2014 At March 31,2013
Sources of funds
Share capital 5 4,450,555 4,370,152
Reserves and Surplus 6 19,360,366 14,216,414
Share application money-pending
allotment
3,069 1,004,353
Fair value change account
(Refernote5.2.17(B))
1,134,613 690,462
Borrowings 7 - -
Total 24,948,603 20,281,381
Application of funds
Investments 8 93,089,768 78,125,187
Loans 9 - -
Fixed assets 10 3,894,946 4,004,329
Deferred tax asset
(Refernote5.2.16)
413,896 502,710
Current assets
Cash and bank balances 11 1,619,661 2,696,152
Advances and other assets 12 36,430,522 33,358,591
Sub-Total(A) 38,050,183 36,054,743
Current liabilities 13 87,277,592 77,459,950
Provisions 14 23,222,598 21,874,638
Sub-Total(B) 110,500,190 99,334,588
Net current assets(C)=(A-B) (72,450,007) (63,279,845)
Miscellaneous expenditure(to the
extent not written off or adjusted)
15 - -
Debit balance in profit and loss a/c - 929,000
Total 24,948,603 20,281,381
Significant accounting policies
and notes to accounts
16

32
Profit and Loss Account for the year ended March31, 2014
(`in000’s)
Particulars Year ended
March 31,2014
Year ended
March 31,2013
1.Operatingprofit/(loss)
(a)Fire Insurance 485,376 (37,439)
(b)Marine Insurance (417,207) (207,858)
(c)Miscellaneous Insurance 4,206,570 2,966,385
2.Incomefrominvestments
(a)Interest/Dividend & Rent–Gross 1,129,758 1,004,751
(b)Profit on sale/redemption of investments 340,515 150,991
Less: Loss on sale/redemption of investments (101,841) (38,588)
3.Other income
(a)Interest income on tax refund 49,799 9,159
(b) Profit on sale/discard of fixed assets 1,372 14,336
(c)Recovery of bad debts written off 23,419 -
Total(A) 5,717,761 3,861,737
4.Provisions(Other than taxation)
(a)For diminution in the value of investments 85,291 21,090
(b)For doubtful debts (161,042) 541,920
(c)For future recoverable under reinsurance
contracts
(122,412) 235,277
5.Other expenses
(a)Expenses other than those related to
Insurance Business
(i)Employees’ remuneration and other expenses 10,080 9,736
(ii)Managerial remuneration 41,324 16,073
(iii)Directors’ fees 600 692
(b)Bad debts written off 637,026 196,681
(c)Loss on sale/discard of fixed assets 24,021 23,504
(d)Penalty (Refernote5.1.14(1)) 500 -
Total(B) 515,388 1,044,973
Profit/(Loss)before tax 5,202,373 2,816,764
Provision for taxation:
(a)Current tax/MAT payable 892,765 582,004
Less: MAT credit entitlement (892,765) (582,004)
(b) Deferred tax(Income)/Expense(Refernote5.2.16)
Profit/(Loss)after tax
88,814 88,814 (240,989) (240,989)
3,057,7535,113,559
Appropriations
Balance of Profit/(Loss) brought forward
from last year
(929,000) (3,986,753)
Balance carried forward to Balance sheet 4,184,559 (929,000)
Basic earnings per share of 10 face value `11.50 `7.00
Diluted earnings per share of 10 face value `11.38 `6.91
CORPORATEOVERVIEW

33
Revenue Accounts for the yearended March31, 2014
Particulars Fire
2013-14 2012-13
1.Premium earned (net) 1 1,534,949 1,385,410
2.Profit on sale/redemption of investments 42,676 16,471
Less: Loss on sale/redemption of investments (12,952) (4,209)
3.Others
Foreign exchange gain/(loss) 804 (6,828)
Investment income from pool
(Terrorism)
145,181 117,109
4.Interest, Dividend & Rent–Gross
(Refernote5.2.5)
142,140 97,368
Total(A) 1,852,798 1,605,321
1.Claims Incurred (net) 2 1,027,287 968,594
2.Commission (net) 3 (95,213) 36,383
3.Operating expenses related to
insurance business (ReferNote5.2.17(A))
4 435,348 637,783
4.Premium deficiency - -
Total(B) 1,367,422 1,642,760
Operating Profit/(Loss) C=(A-B) 485,376 (37,439)
APPROPRIATIONS
Transfer to Shareholders’ Account 485,376 (37,439)
Transfer to Catastrophe Reserve - -
Transfer to Other Reserves - -
Total(C) 485,376 (37,439)
Significant accounting policies and
notes to accounts
16

34
(` in000’s)
Marine Miscellaneous Total
2013-14 2012-13 2013-14 2012-13 2013-14 2012-13
1,566,095 882,274 40,428,089 37,824,831 43,529,133 40,092,515
32,396 11,234 1,672,660 744,425 1,747,732 772,130
(9,832) (2,871) (507,634) (190,251) (530,418) (197,331)
(2,893) (1,679) 19,510 617 17,421 (7,890)
- - 33,353 23,523 178,534 140,632
107,901 66,409 5,126,191 3,895,635 5,376,232 4,059,412
1,693,667 955,367 46,772,169 42,298,780 50,318,634 44,859,468
1,526,326 744,148 33,635,438 32,093,447 36,189,051 33,806,189
164,307 56,171 (2,359,979) (1,923,736) (2,290,885) (1,831,182)
420,241 380,206 11,290,140 9,162,684 12,145,729 10,180,673
- (17,300) - - - (17,300)
2,110,874 1,163,225 42,565,599 39,332,395 46,043,895 42,138,380
(417,207) (207,858) 4,206,570 2,966,385 4,274,739 2,721,088
(417,207) (207,858) 4,206,570 2,966,385 4,274,739 2,721,088
- - - - - -
- - - - - -
(417,207) (207,858) 4,206,570 2,966,385 4,274,739 2,721,088

35
Schedules forming part of the financial statements
Schedule–1 Premium Earned (net)
Fire Marine
Marine-
Cargo
Marine-
Others
Marine-
Total
Motor-OD Motor-TP Motor-
Total
2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14
Premium from direct
business written-net
of service tax
4,870,154 1,900,250 617,367 2,517,617 20,737,195 11,400,807 32,138,002
Add: Premium on
reinsurance accepted
1,166,436 137,745 94,425 232,170 1,456 420,462 421,918
Less: Premium on
reinsurance ceded
4,487,943 550,863 625,777 1,176,640 5,219,111 2,891,012 8,110,123
Net premium 1,548,647 1,487,132 86,015 1,573,147 15,519,540 8,930,257 24,449,797
Adjustment for
change in reserve for
unexpired risks
13,698 (40,197) 47,249 7,052 724,663 775,622 1,500,285
Total premium earned
(net)
1,534,949 1,527,329 38,766 1,566,095 14,794,877 8,154,635 22,949,512
Fire Marine
Marine-
Cargo
Marine-
Others
Marine-
Total
Total
2012-13 2012-13 2012-13 2012-13 2012-13 2012-13 2012-13
Premium from direct
business written-net
of service tax
3,803,403 1,605,594 686,296 2,291,890 18,297,738 8,759,869 27,057,607
Add: Premium on
reinsurance accepted
1,091,655 110,430 81,231 191,661 1,605 (108,821) (107,216)
Less: Premium on
reinsurance ceded
3,464,884 585,698 727,637 1,313,335 4,501,510 2,200,199 6,701,709
Net premium 1,430,174 1,130,326 39,890 1,170,216 13,797,833 6,450,849 20,248,682
Adjustment for
change in reserve
for unexpired risks
44,764 248,092 39,850 287,942 (111,400) (1,058,519) (1,169,919)
Total premium earned
(net)
1,385,410 882,234 40 882,274 13,909,233 7,509,368 21,418,601

36
Schedule–2 Claims Incurred (net)
Fire Marine
Marine-
Cargo
Marine-
Others
Marine-
Total
Total
2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14
Claims paid-Direct 1,180,224 1,578,574 74,151 1,652,725 10,919,708 5,623,864 16,543,572
Add: Re-insurance
accepted
458,564 26,662 - 26,662 13,372 5,688,343 5,701,715
Less: Re-insurance
ceded
1,027,581 435,474 47,953 483,427 2,669,578 3,874,463 6,544,041
Net Claims paid 611,207 1,169,762 26,198 1,195,960 8,263,502 7,437,744 15,701,246
Add: Claims
outstanding at the
end of the period
1,394,260 808,459 98,574 907,033 3,648,181 33,068,023 36,716,204
Less: Claims
outstanding at the
beginning of the year
978,180 510,697 65,970 576,667 2,754,597 31,657,721 34,412,318
Total claims incurred 1,027,287 1,467,524 58,802 1,526,326 9,157,086 8,848,046 18,005,132
Fire Marine
Marine-
Cargo
Marine-
Others
Marine-
Total
Total
2012-13 2012-13 2012-13 2012-13 2012-13 2012-13 2012-13
Claims paid-Direct 950,396 1,120,511 367,739 1,488,250 9,070,315 4,266,800 13,337,115
Add: Re-insurance
accepted
1,575,440 14,075 - 14,075 3,251 6,944,817 6,948,068
Less: Re-insurance
ceded
1,778,258 514,486 345,302 859,788 1,425,771 2,987,548 4,413,319
Net Claims paid 747,578 620,100 22,437 642,537 7,647,795 8,224,069 15,871,864
Add: Claims
outstanding at the
end of the period
978,180 510,697 65,970 576,667 2,754,597 31,657,721 34,412,318
Less: Claims
outstanding at the
beginning of the year
757,164 383,014 92,042 475,056 2,295,472 28,965,186 31,260,658
Total claims incurred 968,594 747,783 (3,635) 744,148 8,106,920 10,916,604 19,023,524

37
Schedule–3 Commission
Fire Marine
Marine-
Cargo
Marine-
Others
Marine-
Total
Total
2013-14 2013-14 2013-14 2013-14 2013-14 2013-14 2013-14
Commission paid
-Direct 139,588 163,539 7,376 170,915 1,094,846 - 1,094,846
Add:
Commission
accepted
on re-
insurance 142,233 9,156 4,288 13,444 - - -
Less:
Commission
ceded
on re-
insurance 377,034 27,399 (7,347) 20,052 1,048,866 526,538 1,575,404
Net Commission (95,213) 145,296 19,011 164,307 45,980 (526,538) (480,558)
Schedule–3A Commission Paid-Direct
(` in000’s)
2013-14
778,918
2012-13
Agents 743,854
Brokers 1,478,108 1,093,487
Corporate agency 717,567 654,268
Referral - -
Total 2,974,593 2,491,609

38
Schedule–4 Operating expenses related to insurance business
Fire Marine
Marine-
Cargo
Marine
-
Others
Marine-
Total
Total
2013-14 2013-14 2013-
14
2013-14 2013-14 2013-14 2013-14
Employees’ remuneration
& welfare benefits
108,161 103,865 6,007 109,872 1,083,924 623,711 1,707,635
Travel, conveyance and
vehicle running expenses
11,925 11,451 662 12,113 119,501 68,763 188,264
Training expenses 1,177 1,130 65 1,195 11,792 6,785 18,577
Rents, rates & taxes* 20,515 19,700 1,139 20,839 205,590 118,301 323,891
Repairs & maintenance 8,892 8,539 494 9,033 89,110 51,275 140,385
Printing & stationery 2,664 2,558 148 2,706 26,696 15,362 42,058
Communication 11,330 10,880 629 11,509 113,540 65,333 178,873
Legal & professional
charges
42,207 19,742 1,142 20,884 206,027 118,552 324,579
Auditors'fees, expenses etc
(a)as auditor 304 292 17 309 3,050 1,755 4,805
(b)as adviser or in any other
capacity, in respect of
(i)Taxation matters - - - - - - -
(ii)Insurance matters - - - - - - -
(iii)Management services - - - - - - -
(c)in any other capacity 43 41 2 43 428 246 674
Advertisement and publicity 30,414 29,206 1,689 30,895 304,793 175,384 480,177
Interest & Bank charges 3,002 2,882 167 3,049 30,079 17,308 47,387
Others
(a)Miscellaneous expenses 134,209 128,878 7,454 136,332 1,343,968 773,346 2,117,314
(b)Business & Sales
promotion
43,398 41,674 2,410 44,084 434,902 250,251 685,153
Depreciation 17,107 16,428 950 17,378 171,438 98,649 270,087
Service tax on premium
account
- - - - - - -
Total 435,348 397,266 22,975 420,241 4,144,838 2,385,021 6,529,859
*Rent expense is net off rental income of` 23,663 thousand (previous period `20,451
thousand)

39
Schedule–5 Share Capital
(` in 000’s)
At March 31,2014 At March
31,2013
Authorised Capital
475,000,000 (previous year: 475,000,000 )Equity Shares of `10 each 4,750,000 4,750,000
Issued Capital
445,055,516 (previous year: 437,015,239) Equity Shares of `10each 4,450,555 4,370,152
Subscribed Capital
445,055,516 (previous year: 437,015,239) Equity Shares of `10 each 4,450,555 4,370,152
Called up Capital
445,055,516 (previous year: 437,015,239) Equity Shares of `10each 4,450,555 4,370,152
Less: Calls unpaid
Add: Equity Shares forfeited (Amount originally paid up) - -
Less: Par value of Equity Shares bought back - -
Less:(i) Preliminary Expenses to the extent not written off - -
(ii) Expenses including commission or brokerage on underwriting
or subscription of shares
- -
Total 4,450,555 4,370,152
Note: Of the above, 325,883,744 shares are held by the holding company, ICICI Bank Limited
(previous year: 320,635,518 shares)
Schedule–6 Reserves and Surplus
(` in 000’s)
At March 31,2014
-
At March 31,2013
1.Capital Reserve -
2.Capital Redemption Reserve - -
3.Share Premium(refernote4.16)
Opening balance 13,882,772 13,867,872
Additions during the period 960,393 14,900
Deductions during the period-share issue expenses 1,000 -
Closing balance 14,842,165 13,882,772
4.General Reserves
Opening balance 333,642 333,642
Additions during the period - -
Deductions during the period - -
Closing balance 333,642 333,642
Less: Debit balance in Profit and Loss Account - -
Less: Amount utilized for Buy-back - -
5.Catastrophe Reserve - -
6.Other Reserves - -
7.Balance of Profit in Profit and Loss Account 4,184,559 -
Total 19,360,366 14,216,414

40
Schedule–7 Borrowings
AtMarch31,2014
-
AtMarch31,2013
Debentures/ Bonds -
Banks - -
Financial Institutions - -
Others - -
Total - -
Schedule–8 Investments
(` in 000’s)
At March 31,2014 At March 31,2013
Long term investments
Government securities and Government guaranteed
bonds including Treasury Bills
33,077,043 32,643,100
Other Approved Securities - -
Other Investments
(a)Shares
(aa) Equity(note5below) 4,945,338 5,428,577
(bb) Preference 51,894 -
(b) Mutual Funds - -
(c) Derivative Instruments - -
(d) Debentures/Bonds 13,468,070 10,086,243
(e) Other Securities (note6below) 500,000 7,750,000
(f) Subsidiaries - -
(g) Investment Properties-Real Estate - -
Investments in Infrastructure and Social Sector 22,911,003 10,141,668
Other than Approved Investments 1,239,809 1,531,660
Total Long Term Investments 76,193,157 67,581,248
Short term investments
Government securities and Government
guaranteed bonds including
Treasury Bills(note3below)
102,542 -
Other Approved Securities 175,248 -
Other Investments
(a)Shares
(aa) Equity - -
(bb) Preference - -
(b) Mutual Funds - -
(c) Derivative Instruments - -
(d) Debentures/Bonds 1,372,263 1,182,892
(e) Other Securities (note7and8below) 14,074,491 8,549,319
(f) Subsidiaries - -
(g) Investment Properties-Real Estate - -
Investments in Infrastructure and Social Sector 1,050,900 300,000
Other than Approved Investments(note4below) 121,167 511,728
Total Short Term Investments 16,896,611 10,543,939
Total Investments 93,089,768 78,125,187

41
Schedule–10 Fixed Assets
Cost/Gross Block
April1, 2013 Additions Deductions March31,2014
Goodwill - - - -
Intangibles-Computer
Software* 1,879,552 299,499 2,972 2,176,079
Land-Freehold 2,411,770 - - 2,411,770
Leasehold Property - - - -
Buildings 236,925 686 - 237,611
Furniture & Fittings 736,248 13,747 118,178 631,817
Information Technology
Equipment 433,891 30,376 50,459 413,808
Vehicles 3,293 - - 3,293
Office Equipment 351,825 3,160 12,722 342,263
Others - - - -
Total 6,053,504 347,468 184,331 6,216,641
Work in Progress
Grand total 6,053,504 347,468 184,331 6,216,641
Previous year 5,673,478 489,045 109,019 6,053,504
*Additions is net of grant received Nil (previous year `7,411 thousand) (refernoteno.5.2.8)
(` in 000’s)
Depreciation Net Block
April1, 2013 For the year
ended
On Sales/
Adjustments
March31,2014 March 31,2014 March 31,2013
- - - - - -
1,108,143 330,924 2,635 1,436,432 739,647 771,409
- - - - 2,411,770 2,411,770
- - - - - -
10,611 3,869 - 14,480 223,131 226,314
512,258 83,345 98,812 496,791 135,026 223,990
359,546 38,371 50,221 347,696 66,112 74,345
1,998 484 - 2,482 811 1,295
157,516 39,887 8,156 189,247 153,016 194,309
- - - - - -
2,150,072 496,880 159,824 2,487,128 3,729,513 3,903,432
165,433 100,897
2,150,072 496,880 159,824 2,487,128 3,894,946 4,004,329
1,744,832 487,957 82,717 2,150,072 4,004,329

42
Schedule–11 Cash and Bank Balances
(` in 000’s)
*Other than Fixed Deposits forming part of Investment assets which is reflected under
Schedule 8 - Investments
Schedule–12 Advances and Other Assets
(` in 000’s)
AtMarch31,2014 AtMarch31,2013
Advances
Reserve deposits with ceding companies 46,619 -
Application money for investments - -
Prepayments 89,513 84,256
Advances to Directors/Officers - -
Advance tax paid and taxes deducted at source
(net of provision for tax)
1,375,951 1,383,906
MAT credit entitlement 1,730,076 837,978
Others
-Sundry Deposits 208,855 158,254
-Provision for doubtfuldebts (6,083) (3,606)
-Surplus in Gratuity fund - -
-Advance to Employees against expenses 98 202,870 117 154,765
Total(A) 3,445,029 2,460,905
Other Assets
Income accrued on investments/deposits 2,556,115 1,866,509
Outstanding Premiums 4,731,159 3,805,912
Less: Provisions for doubtful debts 2,780 4,728,379 - 3,805,912
Agents’Balances - -
Foreign Agencies’Balances - -
Due from other Entities carrying on Insurance
business (net)(including reinsurers)
26,053,226 26,205,879
AtMarch31,2014
408,524
AtMarch31,2013
Cash (including cheques,drafts and stamps) 487,657
Balances with scheduled banks:
(a)Deposit Accounts
(aa)Short-term (due within 12 months)* 560,291 1,550,267
(bb)Others - -
(b)Current Accounts 650,846 658,228
(c)Others - -
Money at Call and Short Notice
(a)With Banks - -
(b)With otherinstitutions - -
Others - -
Total 1,619,661 2,696,152

43
Less: Provisions for doubtful debts 952,647 25,100,579 1,118,944 25,086,935
Due from subsidiaries/holding company - -
Deposit with Reserve Bank of India - -
[Pursuant to section 7 of Insurance Act, 1938]
Others
-Service Tax unutilized credit 292,694 44,681
-Service Tax paid in advance 54,782 63,467
-Unsettled investment contract receivable 222,550 -
-Margin deposit 30,000 30,000
-Sundry receivable 394 600,420 182 138,330
Total(B) 32,985,493 30,897,686
Total(A+B) 36,430,522 33,358,591
Schedule–13 Current Liabilities
(` in 000’s)
AtMarch31,2014
65,960
AtMarch31,2013
Agents’Balances 73,706
Balances due to other insurance companies
(net)
3,099,040 1,843,425
Deposits held on re-insurance ceded 4,820,511 2,257,643
Premiums received in advance 805,448 1,114,336
Unallocated Premium 1,727,950 1,792,503
Sundry Creditors 2,616,761 1,922,238
Due to subsidiaries/holding company 44,055 40,474
Claims Outstanding (gross) 70,770,449 65,232,383
Due to Officers/Directors - -
Others:
-Statutory Dues 278,338 300,040
-Salary Payable 18,493 11,455
-Collections-Environment Relief fund
(refer note no.5.2.9)
205 266
-Unclaimed amount of policy holders
(refer note 5.2.14)
1,025,874 992,986
-Book Overdraft 1,477,818 1,368,691
-Employee rewards 518,977 504,000
-Deposits 7,713 5,804
-Service Tax Liability
Total
- 3,327,418
87,277,592
- 3,183,242
77,459,950
CORPORATEOVERVIEW

44
Schedule–14 Provisions
(` in 000’s)
AtMarch31,2014
22,679,328
AtMarch31,2013
Reserve for unexpired risk 21,228,505
Reserve for premium deficiency
(refer note no.5.2.17(D))
- -
For taxation (less advance tax paid and
Taxes deducted at source)
- -
For proposed dividends - -
For dividend distribution tax - -
Others
-Gratuity 14,059 36,475
-Long term performance pay 348,701 311,597
-Accrued leave 67,645 62,784
-For future recoverable under
reinsurance contracts
Total
112,865 543,270
23,222,598
235,277 646,133
21,874,638
Schedule–15 Miscellaneous expenditure (To the extent not written off or adjusted)
(` in 000’s)
AtMarch31,2014
-
AtMarch31,2013
Discount allowed on issue of shares/debentures -
Others - -
Total - -
Schedule–16
Significant accounting policies and notes forming part of the financial statements for the
year ended March 31, 2014
1. Background
ICICI Lombard General Insurance Company Limited (‘the Company’) was incorporated on
October 30, 2000 and is a joint venture between ICICI Bank Limited and Fair fax Financial
Holdings Limited. The Company obtained Regulatory approval to undertake General
Insurance business on August 3, 2001 from the Insurance Regulatory and Development
Authority (‘IRDA’) and has also obtained its certificate of renewal of registration with
validity until March31, 2015.
2. Basis of preparation of financial statements
The financial statements have been prepared and presented under the historical cost
convention, unless otherwise specifically stated, on the accrual basis of accounting, and
comply with the applicable accounting standards referred to in sub-section (3C) of section
211 of the Companies Act, 1956 (‘the Act’) which as per a clarification issued by Ministry of

45
Corporate Affairs continue to apply under section 133 of the Companies Act, 2013 (which
has superseded section 211 (3C) of the Companies Act, 1956 w.e.f. September 12, 2013), and
in accordance with the provisions of the Insurance Act, 1938, Insurance Regulatory and
Development Authority Act, 1999, the Insurance Regulatory and Development Authority
(Preparation of Financial Statements and Auditor’s Report of Insurance Companies
Regulations), 2002 (‘the Regulations’) and orders/ directions prescribed by the IRDA in this
behalf, the provisions of the Companies Act, 2013 (to the extent notified) and the Companies
Act, 1956 (to the extent applicable) in the manner so required and current practices prevailing
within the insurance industry in India.
3. Use of estimates
The preparation of the financial statements in conformity with 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, reported amounts of revenues and
expenses for the year ended and disclosure of contingent liabilities as of the balance sheet
date. The estimates and assumptions used in these financial statements are based upon
management’s evaluation of the relevant facts and circumstances as on the date of the
financial statements. Actual results may differ from those estimates. Any revision to
accounting estimates is recognised prospectively in current and future periods.
4. Significant accounting policies
Revenue recognition Premium income
Premium including reinsurance accepted is recorded for the policy period at the
commencement of risk and for installment cases, it is recorded on installment due dates.
Reinstatement premium is recorded as and when such premiums are recovered. Premium
earned including reinstatement premium and re-insurance accepted is recognised as income
over the period of risk or the contract period based on 1/365 method, whichever is
appropriate on a gross basis net of service tax. Any subsequent revisions to premium as and
when they occur are recognised over the remaining period of risk or contract period, as
applicable.
Adjustments to premium income arising on cancellation of policies are recognised in the
period in which it is cancelled.

46
5. Income from reinsurance ceded
Commission on reinsurance ceded is recognised as income in the period of ceding the risk.
Profit commission under reinsurance treaties, wherever applicable, is recognised as income in
the year of final determination of profits and combined with commission on reinsurance
ceded.
6. Income earned on investments
Interest income on investments is recognised on an accrual basis. Accretion of discount and
amortization of premium relating to debt securities and non convertible preference shares is
recognised over the holding/ maturity period on a straight-line basis.
7. Dividend income is recognised when the right to receive dividend is established.
Realised gain/ loss on securities, which is the difference between the sale consideration and
the carrying value in the books of the Company, is recognised on the trade date. In
determining the realised gain/loss, cost of securities is arrived at on ‘Weighted average cost’
basis. Further, in case of listed equity shares and mutual funds the profit or loss on sale also
includes the accumulated changes in the fair value previously recognised in the fair value
change account.
Sale consideration for the purpose of realised gain/loss is net of brokerage and taxes, if any,
and excludes interest received on sale.
8. Premium received in advance
This represents premium received during the period, where the risk commences subsequent to
the balance sheet date.
9. Reinsurance premium
Insurance premium on ceding of the risk is recognised in the period in which the risk
commences in accordance with reinsurance arrangements with the reinsurers. Any
subsequent revision to premium ceded is recognised in the period of such revision.
Adjustment to reinsurance premium arising on cancellation of policies is recognised in the
period in which they are cancelled.

47
10. Reserve for unexpired risk
Reserve for unexpired risk is recognised net of reinsurance ceded and represents premium
written that is attributable and to be allocated to succeeding accounting periods for risks to be
borne by the Company under contractual obligations on a contract period basis or risk period
basis, whichever is appropriate. It is calculated on a daily pro-rata basis subject to a minimum
of 50% of the aggregate premium, written on policies during the twelve months preceding the
balance sheet date for fire, marine cargo and miscellaneous business and 100% for marine
hull business, on all unexpired policies at balance sheet date, in accordance with section 64 V
(1) (ii) (b) of the Insurance Act, 1938.
11. Claims
Claims incurred comprise claims paid, estimated liability for outstanding claims made
following a loss occurrence reported and estimated liability for claims Incurred But Not
Reported (‘IBNR’) and claims Incurred But Not Enough Reported (‘IBNER’). Further,
claims incurred also include specific claim settlement costs such as survey/legal fees and
other directly attributable costs.
Claims (net of amounts receivable from reinsurers/co insurers) are recognised on the date of
intimation based on internal management estimates or on estimates from surveyors/insured in
the respective revenue account(s).
Estimated liability for outstanding claims at balance sheet date is recorded net of claims
recoverable from/payable to co- insurers/reinsurers and salvage to the extent there is certainty
of realisation.
Estimated liability for outstanding claims is determined by the management on the basis of
ultimate amounts likely to be paid on each claim based on the past experience and in cases
where claim payment period exceeds four years based on actuarial valuation. These estimates
are progressively revalidated on availability of further information.
IBNR reserves are provisions for claims that may have been incurred during the accounting
period but have not been reported or claimed. The IBNR provisional so includes provision,
for claims that have been incurred but are not enough reported (IBNER). The provision for
IBNR and IBNER is based on actuarial estimate duly certified by the Appointed Actuary of
the Company. The actuarial estimate is derived in accordance with relevant IRDA regulations
and Guidance Note GN21 issued by the Institute of Actuaries of India.

48
12. Acquisition costs
Acquisition costs are those costs that vary with, and are primarily related to the acquisition of
new and renewal of insurance contracts viz. commission, policy issue expenses, etc. These
costs are expensed in the period in which they are incurred.
13. Premium deficiency
Premium deficiency is recognised for the Company as a whole when the sum of expected
claim costs and related expenses and maintenance costs (related to claims handling) exceed
the reserve for unexpired risks. In computing the overall Premium deficiency in
miscellaneous revenue account level, the Premium deficiency arising out of Motor Third
Party portfolio including erstwhile IMTPIP and Declined Risk Pool is not recognised. The
expected claim costs is calculated and duly certified by the Appointed Actuary.
14. Investments
Investments are recorded at cost on traded at and include brokerage, transfer charges, stamps
etc, if any, and exclude interest accrued up to the date of purchase.
15. 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’.
16. Investments other than ‘short term investments’ are classified as ‘long term investments’.
The investments are shown at Company level and not segregated at Shareholder’s level and
Policy holder’s level.
17. Valuation
Investments are valued as follows:
Debt securities and Non–convertible preferences hares
All debt securities including government securities and non convertible preference shares are
considered as ‘held to maturity’ and accordingly stated at amortised cost determined after
amortization of premium or accretion of discount on a straight line basis over the holding
period/maturity.
CORPORATEOVERVIEWBUSINESSOVERVIEW

49
Equity shares and Convertible preference shares
Listed equities and convertible preference shares at the balance sheet date are stated at fair
value, being the last quoted closing price on the National Stock Exchange and in case these
are not listed on National Stock Exchange, then based on the last quoted closing price on the
Bombay Stock Exchange.
Mutual funds (Other than venture capital fund)
Mutual fund investments are stated at fair value ,being the closing net asset value at balance
sheet date.
Fair Value Change Account
In accordance with the Regulations, unrealized gain/loss arising due to changes in fair value
of listed equity shares and mutual fund investments are taken to the ‘fair value change
account’. This balance in the fair value change account is not available for distribution,
pending realisation.
Investments other than those mentioned above are valued at cost.
18. Impairment of Investments
The Company assesses at each balance sheet date whether there is any indication that any
investment in equity or units of mutual fund may be impaired. If any such indication exists,
the carrying value of such investment is reduced to its recoverable amount and the
impairment loss is recognised in the profit and loss account. If at the balance sheet date there
is any indication that a previously assessed impairment loss no longer exists, then such loss is
reversed and the investment is restated to that extent.
19. Employee Stock Option Scheme (ESOS)
The Company follows the intrinsic method for computing the compensation cost, for options
granted under the scheme(s). The difference if any, between the intrinsic value and the grant
price, being the compensation cost is amortised over the vesting period of the options.

50
20. Fixed assets, Intangibles and Impairments Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. Cost includes the purchase price
and any cost directly attributable to bringing the asset to its working condition for its intended
use.
Depreciation on assets purchased/disposed off during the year is provided on prorata basis
with reference to the date of additions/deductions.
Depreciation on fixed assets is provided using higher of the rates based on economic useful
lives of assets as estimated by the management and the straight-line method specified as per
Schedule XIV of the Companies Act, 1956 as below,
In case of following categories of fixed assets, the management’s estimate of the useful lives
is lower than prescribed in Schedule XIV of the Companies Act, 1956.
Nature of Fixed Assets Management Estimate of
Useful Life in years
3.00
Rates prescribed as per
Schedule VI of The
Companies Act, 2013
Information Technology equipment 6.17
Furniture & Fittings 6.67 15.80
Office Equipment 10.00 21.05
Vehicles 5.00 10.53
Intangibles Assets
Intangible assets comprising computer software are stated at costless amortization. Computer
software’s including improvements are amortised over a period of 4 years, being the
management’s estimate of the useful life of such intangibles.
All assets including intangibles individually costing up to `5,000 are fully depreciated/
amortised in the year in which they are acquired.
21. Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that any
asset may be impaired. If any such indication exists, the carrying value of such assets is
reduced to its recoverable amount and the impairment loss is recognised in the profit and loss
account. If at the balance sheet date there is any indication that a previously assessed

51
impairment loss no longer exists, then such loss is reversed and the asset is restated that
extent.
22. Operating Lease
Operating Lease payments of assets/premises taken on operating lease are recognised as an
expense in the revenue(s) and profit and loss account over the lease term on straight-line
basis.
23. Employee benefits Provident fund
This is a defined contribution scheme and contributions payable to the Regional Provident
Fund Authority is provided on the basis of prescribed percentage of salary and is charged to
revenue account(s) and profit and loss account.
24. Gratuity
Gratuity, which is a defined benefit scheme, is 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.
25. Accrued leave
Compensated absences are provided based on actuarial valuation including actuarial
gains/losses at balance sheet date and is recognised in the revenue account(s) and profit and
loss account.

52
CONCULSION
The insurance sector has gone through a number of phases by allowing private companies to
solicit insurance and also allowing foreign direct investment. India allowed private
companies in insurance sector in 2000, setting a limit on FDI to 26%, which was increased to
49% in 2014. However, the largest life-insurance company in India, Life Insurance
Corporation of India is still owned by the government and carries a sovereign guarantee for
all insurance policies issued by it.
ICICI Lombard GIC Ltd. is the largest private sector general insurance company in India
with a Gross Written Premium (GWP) of Rs 71.34 billion for the year ended 31 March 2014.
Reflecting a slowdown in India's non-life insurance industry, growth in gross premium
income of country's largest private insurer ICICI Lombard fell to 12 per cent in 2013-14 from
19 per cent in the year-ago period. The premium income of ICICI Lombard General
Insurance Company at the end of fiscal ended March, 2014 stood at Rs 7,134 crore - a growth
of about 12 per cent.
In 2012-13, gross premium collection had gone up by 19 per cent to Rs 6,420 crore. Net
premium income rose 8.58 per cent to Rs 4,353 crore during 2013-14. Net premium income
from the fire insurance stood at Rs 153 crore, up from Rs 138 crore in the previous year.
In the marine insurance category, premium income shot up by 78 per cent to Rs 157 crore in
2013-14, from Rs 88 crore in the previous year. With regard to the life insurance business,
ICICI Prudential Life's annual premium fell to Rs 3,444 crore, from Rs 3,532 crore in 2012-
13.

53
BIBLIOGRAPHY
 Advanced Financial Accounting – Dr. Varsha Ainapure.- Manan Prakashan
 http://business.mapsofindia.com/insurance/policies/types.html
 http://financialservices.gov.in/Insurance/Acts/TheInsuranceAct_1938.pdf
 http://www.insuranceinfo.com.my/learn_the_basics/types_of_insurance.php?intPrefL
angID=1
 http://en.wikipedia.org/wiki/General_insurance
 http://www.icai.org/post.html?post_id=854
 http://www.investopedia.com/terms/f/fire-insurance.asp
 http://en.wikipedia.org/wiki/ICICI_Lombard
 https://www.icicilombard.com/about-us/Promoters.html

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