IDRA employs spl audit firms to check accounts of 3 life insurers

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Jasim Uddin Haroon Insurance regulator Wednesday appointed audit firms to examine in-depth the accounts of three life insurers and ascertain their actual financial health for the greater interest of the policyholders. The audit firms appointed by the Insurance Development and Regulatory Authority (IDRA) will look into the accounts of Baira, Golden and Homeland life insurance companies under section 48 and 49 of insurance act of 2010, it said. M Shefaque Ahmed, IDRA chairman, told the FE that special audits were being carried out for the interest of the policyholders. "Actually, we're very concerned about the three life insurance companies as they are in negative surplus for long," Mr Shefaque added. He said: "We've asked the audit firms to commence their work, immediately." Three audit firms --- ACNABIN, Hoda Vasi Chowdhury and Abedin & Co --- will examine audit reports of the three companies for the last five years. Officials at the IDRA said regarding special audit for the years 2009 and 2010, related information and documents will be checked by the auditors as per Terms of Reference (TOR). They said audit of accounts for those two years will be in-depth. They also said data compiled after 31 December 2010 will also be examined on selective cases. Sources at the IDRA said the audit reports will contain, among others, observations, opinions, and recommendations. The auditors have been asked to submit reports to the IDRA within 90 working days from the commencement of their works or at the latest by 29 March 2012. The auditors will check whether the chairmen, directors, chief executive officers or any other employee of the insurance companies have any life insurance policies with the companies. If there are any such policies, the auditors will have to obtain a list of 25 large policyholders along with the sum assured, yearly premium amount, date of issue of policy, method of premium payment etc. The auditors will check whether there were any irregularities in the issuance of such insurance policies, according to TOR. Auditors will prepare a list of investments of broad categories made by the companies. They will check whether actual investments were made complying with the required investment as per section 27 of the Insurance Act, 1938 and the Rules made there under and corresponding section of the Insurance Act, 2010. They will check whether the premium rates and product benefits published in the brochure are consistent with the premium rates and benefits as certified by the actuary. "Any deviations should be clearly spelled out," the TOR stated. TOR said actuarial valuation reports for the years 2006, 2007, 2008, 2009 and 2010 will be checked by the auditors. They will check whether Tax and VAT (value added tax) are duly deducted and deposited in applicable cases. The audit firms will check and verify premium income of the companies in question for the last five years with the figures given in the revenue accounts. Auditors will check total documents for one month for the year 2009 and 2010 in details for selected offices and will also review the information for preceding previous three years. They will collect information on lapsed policies in the prescribed format to check the accuracy of the data supplied by the respective management. They will also examine procedure of computation in relation to outstanding amount of premium as shown in the balance sheet. They will check renewal of policies and present the data for five years, ending 2010. The auditors will examine agents' balance outstanding as on balance sheet dates and realisation status in subsequent months. Reasons for creation of agents' balances should be given by the management, it said. Discrepancies in data given by the management and actual data collected by the investigation teams should be provided along with their comments. Data on claims settlement should be collected and accuracy of the data should be checked as far as practicable, TOR noted. The auditors will obtain data on aging of claims settled and check the accuracy of data as far as practicable. Management expenses will also be verified, they were advised. "Check whether commission or other forms of remuneration was paid to persons other than the licensed life insurance agents and employer of agents," the Tor stated. If such payments were made make a list of such persons together with the amount paid and their relationship with the company. Homeland Life Insurance Company was incorporated in 1996 under the Companies Act, 1994 and registered under the Insurance Act, 1938 to carry on life insurance business. It was required to raise public shares within three years of its business operation to meet its capital requirement. But the company could not go public. Golden Life Insurance Company was incorporated in 2000 to carry on life insurance business. Baira Life launched its operation in 2000. It also could not go for initial public offering even eleven years after its inception.