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IRDA IRDA Rules in Insurance sector. Capital structure of Insurance Companies.

PRESENTED BY,GROUP NO : 7 Gopika Athira N.R Hairunniza Shilpa V.S Mirsana V.M Neethu Appu Vishnu N.K

IRDA ACT? The Act was passed in 1999.

"To Protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. "

INSURANCE SECTOR

IRDA Rules in

ESTABLISHMENT AND INCORPORATION OF AUTHORITY Central Govt. by notification for the

purpose of the act, the authority called IRDA established.

It shall be a body corporate having perpetual succession and a common seal with power, to acquire hold and dispose of property, both movable and immovable and to contract and by the name sue or be sued.

The head office shall be at such place as the Central Govt. may decide.

It may establish offices at other place in India.

COMPOSITION OF AUTHORITY

As per the section 4 of IRDA Act 1999, IRDA specify the composition of authority as a ten member team consisting of,

A Chairperson. Not more than five whole – time

members. Not more than four part – time

members.

(All appointed by the Govt. Of India)

FUNCTIONS OF IRDAThe Authority shall have the duty to

regulate, promote and ensure orderly growth of the insurance business and re-insurance business.

1. Registration (licensing) including renewal of registration of insurance companies.

2. Licensing of insurance intermediaries such as agents, surveyors and loss assessors, third party administrators, brokers, etc.

3. Official approval of agent’s training institutions.

CONTINUATION..

4. Monitoring all non-tariff products including pricing of products, terms and conditions there of etc.

5. Supervision of the functioning of the companies and intermediaries including review of companies annual statement.

6. Formulation of regulations.7. Enforcement of discipline.8. Consumer education and assistance.

REGULATORY FRAMEWORK

The main regulations that regulate the insurance business are,

1. The Insurance Act 19382. The Life Insurance Corporation Act

19563. The General Insurance Business

(Nationalisation) Act 19824. The Marine Insurance Act 1963, and5. The Motor Vehicles Act 1988.

(The Indian Contract Act 1872, governs most of the aspects of the insurance contract.)

1. DEPOSITSAccording to Sec. 7 of The Amended

Insurance Act 1938, every insurer shall deposit with RBI, either in cash or in approved securities estimated at the market value on the day of deposit, to carry insurance business.

1. In case of life insurance, a sum of 1% of total gross premium, not exceeding Rs. 10 crores.

2. In case of general insurance, a sum of 3% of total gross premium, not exceeding Rs. 10 crores.

3. In case of re-insurance, a sum equivalent to Rs. 20 crores.

CONTINUATION..4. In case of marine insurance only and

exclusively to country craft or its cargo or both, only Rs.100000

(These deposits will be held by the RBI though the credit of the insurer and are returnable to the insurer in the event the provisions of the Insurance Act mandate such return.)

2. INVESTMENTSEvery insurer is required to invest

and keep invested certain amount of assets as determined under Insurance Act. The funds of the policyholders cannot be invested outside India.

1. Life insurer is required to invest its all time assets.

2. The value of which is not less than the sum of the amount of its liabilities to policyholders.

INSURANCE ADVISORY COMMITTEE The Insurance Advisory Committee shall

consist of not more than twenty-five members excluding ex-officio members to represent the interests of commerce, industry, transport, agriculture.

The Chairperson and the members of the Authority shall be the ex officio Chairperson and ex officio members of the Insurance Advisory Committee.

CONTINUATION.. The objects of the Insurance Advisory

Committee shall be to advise the Authority on matters relating to the making of the regulations under section 26.

Without prejudice to the provisions of sub-section (4), the Insurance Advisory Committee may advise the Authority on such other matters as may be prescribed.

INSURANCE COMPANIES

Capital Structure of

REQUIREMENTS TO CAPITAL Companies proposes carry on life

insurance or general insurance business have a paid up equity capital of Rs. 100 crores or Rs. 200 crores.

Companies exclusively proposes to carry on re-insurance business should have a paid up capital of Rs.200 crores.

CAPITAL STRUCTURE

There are two forms of capital, EQUITY CAPITAL and DEBT CAPITAL.

It refers to proposional equity capital and debt capital in the total capital. It consists of,Equity share capital contributed by the

share holders.Retained earnings which represents the

accumulated profits of the company.

CONTINUATION.. Debt capital refers to the borrowed

capital of the insurance company.Company may borrow money from public

through the issue of debentures. It is very important to keep capital structure

balanced.

(The proportion between the own capital and debt capital should be a balanced one, to provide safety to the investment and certainty of return.)

FACTORS CONSIDERED BY SETTING UP A CAPITAL STRUCTURE

1. An insurance company is an ongoing operation.

2. Paid up claim varies from year to year.3. Insurance industry is very co.......4. Only serious players should play in the

market.

REQUIREMENT Public company should have only,

Ordinary shares.One face value for one share.Same paid up value.