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IAI Actuarial Core Principles · Business Finance · Regulation of financial reporting of incorporated entities

In the published financial statements of an Indian life insurer prepared under IRDAI requirements, where is the surplus or deficit arising from the insurance business first reported?

A life insurer reports its surplus or deficit in the Revenue Account, also called the Policyholders' Account. Premiums, claims, expenses and movement in policy liabilities are all recorded there. Only the amount transferred to shareholders then flows to the Profit and Loss Account.

  1. AIn the Revenue Account (Policyholders' Account) of the relevant businessCorrect
  2. BDirectly in the Balance Sheet reserves without any prior statement
  3. CIn the Cash Flow Statement only
  4. DIn the Notes to accounts as a contingent item
  5. In the Shareholders' Profit and Loss Account as premium income

Explanation

Premiums, claims, commissions, expenses and changes in policy liabilities are recorded in the Revenue Account (Policyholders' Account), which yields a surplus or deficit. Only the amount transferred to the shareholders' account then appears in the Profit and Loss Account. Premium income itself is not reported in the shareholders' account.

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