Outgoing Co-insurance:

a) Scrutinize the transaction relating to outgoing business i.e. where the company is the leader.

b) Verify the transactions with reference to the relevant risks assumed under policies and correspondingly for debits arising to the Co-insurer on account of their share of claims.

Catastrophe Reserve

1) Required to meet future potential liabilities against insurance policies in force.

2) Catastrophe Reserve cannot be created for a specific purpose & shall be created in accordance with norms, if any, prescribed by the Authority.

3) Investment of funds out of catastrophe reserve shall be made in accordance with prescription of the Authority.

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4) The auditor should, depending upon the facts of the case, evaluate the adequacy of such a reserve.

Solvency Margin [Section 64VA of the Insurance Act, 1938]

1) Meaning: Every insurer is required to maintain an excess of the value of its assets over the amount of its liabilities at all times. The excess is known as ‘Solvency Margin’.

2) Solvency margin should be the highest of the following amounts: (a) 50/- Crore Rupees (100/- Crore rupees in case of a reinsurer) (b) a sum equivalent to 20% of net premium income (c) a sum equivalent to 30% of net incurred claims. However such condition may be relaxed by the Authority in certain special circumstances.

3) If not maintain such margin at any time, then have to submit financial plan to the Authority indicating the plan of action to correct the deficiency in the solvency margin.

4) If fails to comply with the requirements of solvency margin, it shall deemed to be insolvent and may be wound up by the Court.

Trade Credit Insurance

1) "Trade Credit Insurance" means insurance of suppliers against the risk of non-payment of goods or services by their buyers who may be situated in the same country (domestic risk) or situated in another country (export risk) against (a) non-payment as a result of insolvency of the buyer (b) non-payment after an agreed number of months after due date (c) non-payment following an event outside the control of the buyer or the seller (political risk cover).

2) Political risk cover is available only in case of buyers outside India and in countries agreed upon at the proposal stage.

3) Following conditions is to be satisfied:

a) Policyholder's loss is non-receipt of trade receivable arising out of a trade of goods or services.

b) Policyholder is a supplier of goods or services in consideration for a fair market value.

c) Policyholder's trade receivable does not arise out of factoring or reverse factoring arrangement or any other similar arrangement.

d) Policyholder has a buyer or customer, who is liable to pay a trade receivable to the policy holder in return for the goods and services received by him from the policy holder, in accordance with a policy document filed with the insurer.

e) Policyholder undertakes to pay premium for the entire policy period.

f) Any other requirement that may be specified by the Authority from time to time.

4) This policy shall not be issued to banks/financiers/lenders or the beneficiary of such policy cannot be a banks/

financiers/lenders. Further this policy shall also not applicable to any receivable arising from a financial or consultancy service.

Deposits [Sec. 7 of Insurance Act, 1938]

1) Every insurer shall, in respect of the insurance business carried on by him in India, deposit and keep deposited with the RBI in one of the offices in India a sum equivalent to 3% of total gross premium written in India in any FY.

2) This deposit is to be kept for and on behalf of the GOI.

3) The deposit can be made either by way of cash or investment in approved securities.

4) If securities are deposited, their estimated market value on the date of deposit is to be seen.

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22 PEER REVIEW

Topic Introduction

1) It is a regulatory mechanism for monitoring the performances of professionals for maintaining quality of service expected of them.

2) It was established by ICAI in March, 2002.

3) Under peer review one CA will examine the other CA to judge the quality of attestation work performed by them.

4) The former is known as Reviewer and the latter is known as practice unit/audit firm.

5) The peer review is administered by Peer Review Board (PRB) constituted by ICAI.

6) The Reviewer shall submit his report to PRB and necessary follow up action may be taken by PRB on such report.

Objective of Peer Review - The members of the Institute:

1) Comply with the technical standards laid down by ICAI.

2) Ensure that they have proper system for maintaining the quality of attestation services performed by him.

3) To ensure adherence to various statutory and other regulatory requirements.

4) To enhance the reliance placed by the users of FS for economic decision making.

Scope of Peer Review -The Review shall focus on:

1) Compliance with Technical, Ethical & Professional Standards.

2) Quality of Reporting.

3) System and procedures for carrying out assurance services.

4) Training Programs for staff & appropriateness of infrastructure.

5) Compliance with direction and/or guidelines issued by ICAI (fees to be charged, number of audits undertaken etc.).

6) Compliance with directions and / or guidelines issued by ICAI in relating to article/audit assistants.

7) The entire peer review process is directed at the attestation services which include all those services such as internal audit, concurrent audit etc.

Areas excluded from scope of Peer Reviewer 1) Management Consultancy Engagements

2) Representation before various Authorities 3) Prepare tax returns

4) Providing tax advice 5) Compilation of FS 6) Due diligence

7) Testifying as an expert witness 8) Providing expert opinion.

Technical, Ethical and Professional Standards as per Statement on Peer Review

1) Accounting Standards l Auditing Standard l Engagement standards l Statements l Guidance notes l Standards on Internal Audit l Statements on Quality Control l Notifications / Directions / Announcements / Guidelines / Pronouncements / Professional standards issued from time to time by ICAI.

2) Framework for the Preparation and presentation of financial statements l Framework of statements and Standard on Auditing l Framework for assurance engagements l Standard on Assurance Engagements l Standards on Quality Control and Guidance Notes on related services issued, from time to time, by the ICAI.

3) Provisions of the various relevant statutes/regulations which are applicable in the context of the specific engagements being reviewed including instructions/guidelines/notifications/ directions issued by regulatory bodies.

Applicability of Peer Review (Refer - Peer Review Chapter)

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Peer Review Board (Refer - Peer Review Chapter)

Eligibility of Reviewer

1) Peer Reviewer: (a) A member of ICAI (b) at least 10 years of experience in practice (c) Currently active in the