Sub:Reconciliation of Co-Insurers Balance from ETASS
1. IRDAIGuidelines on Participation in Electronic Transaction Administration andSettlement System (ETASS) bearing Ref: IRDA/NL/ETASS/RIN/103/05/2015 dated 11thMay 2015
2. IRDACircular bearing ref IRDA/NL/CIR/MISC/101/06/2018 dated 27th June2018
GeneralInsurance Council has been implementing ETASS for capturing of Co-insurancetransactions, reconciliation and settlement of balances between memberinsurance companies. The system has been in operation from April 2017 for alllines of Business and GI Council agreed that from 1st April 2018, the systemwould be treated as live and all co-insurance transactions will be settledbetween member insurers only on the basis of ETASS statement.
TheAuthority had noticed that the inter-company balances in re-insurance andco-insurance business are significantly high and are on the rise. There-insurance and co-insurance transactions typically involve multipleorganizations across various geographies giving rise to following issues:
1. Inability of parties to the transactions toagree, resulting in growing inter-company balances;
2. Lack of cooperation between the companies andinadequate documentation, posing a problem towards the efforts to minimizethese balances;
3. Lack of a common platform to handle there-insurance and co-insurance transactions;
4. Delayed settlement of balances;
5. High turnaround times.
Inthis regard, it is hereby directed that:
I. For all the co-insurance transactions thattook place after 1st April 2018, the balances due to/fromco-insurers shall be reconciled with the balances as per ETASS;
II. A certificate from the statutory auditorshall be submitted to the Authority, in the format as prescribed in Annexure A(Enclosedbelow), along with the annual financial statementscertifying that there is no difference in books of accounts and ETASS withregard to co-insurance transactions that relate to policies with a risk startdate on or after 1st April 2018;
III. In case of differences, the co-insurer wisedifferences shall be reported in the Auditor’s certificate;
IV. Balances for the transactions that took placebefore 1st April 2018 shall be reconciled by the insurer and the same shall besubmitted to the Authority on or before 30th September 2019 withoutfail.
ThisCircular is being issued under section 14 of IRDAI Act, 1999. All insurers areadvised to take note of the above for compliance from Q1 of FY2019-20 andthereafter.
Certificate on Reconciliation ofCo-Insurers Balances with ETASS
I/We..............(Name of the Auditor), the statutory auditor of ..........................(name of the Insurer) (hereinafter “the Insurer”) have examined the statementof balances due to/from other insurers in respect of co-insurance transactionthat took place from 1st April 2018 to ………. (specify the date)(herein after referred to as statement).
Themanagement of the Insurer is responsible for preparation of the statement. Themanagement of the Insurer is also responsible for preparation and maintenanceof the proper books of account and such other relevant records as prescribedunder relevant laws and Regulations. This responsibility includes designing,implementing and monitoring of internal controls relevant to the preparationand maintenance of such books of account and records and the particularsfurnished in the aforesaid Return.
My/Ourresponsibility is to verify the aforesaid statement. We have carried out ourverification in accordance with the Guidance Note on Audit Reports andCertificates for Special Purposes, issued by Institute of Chartered Accountantsof India.
Wehave verified the reconciliation of the co-insurers balances as per thestatement with the balances as per Electronic Transaction Administration andSettlement System (ETASS). Based on our aforesaid reconciliation and to thebest of our knowledge and belief and according to the information, explanationsand representations given to us by the management of the Insurer, I / we herebycertify that:
1. All the co-insurance transactions that tookplace on or after 1st April 2018 have been entered into ETASSsystem. (Please furnish the details of deviation, if any observed).
2. Co-insurers balances shown in the books ofaccounts have been tallied with the balance as per ETASS on quarterly basis.(Please furnish the details of deviation, if any observed).
3. No differences have been observed in theco-insurers balances as per books of accounts and ETASS. (Please furnish thedetails of deviation, if any observed*).
4. Co-insurers balances outstanding for morethan ninety days as on…… (specify the date) has been placed with zero value forthe purpose of computation of Solvency Margin as on that date. (Please furnishthe details of deviation, if any observed*)
Placeof Signature For XYZ & Co.
1. In case of any differences in the co-insurersbalances as per books of accounts and ETASS, a statement showing age wise andinsurer wise differences shall be submitted along with the Auditor’sCertificate.
2. In case of any unreconciled co-insurersbalances (even if outstanding for less than 90 days) have been considered forthe purpose of computation of solvency margin, amount of the same shall beseparately disclosed in the Auditor’s certificate.