CAG issues recommendations to PSU general insurers

KOLKATA: It has been the insurance regulator who generally issues recommendations to insurers and reinsurers. In a turn of events, a set of recommendations has come from the Comptroller & Auditor General (CAG) of India asking public sector general insurers to institute a transparent system for empanelment and selection of brokers as required by the ministry of finance.

CAG recently concluded audits of public sector general insurers for a period of five years and has asked them to strengthen measures to build an appropriate data on ratings of reinsurers as well as adherence to IRDA stipulations on ratings of reinsurers. CAG has further asked reinsurers to strengthen internal control measures to monitor recoverables from reinsurers and timely flow of information from regional offices to the reinsurance department.

Additionally, it has advised the insurers to develop a strategic document, outlining policies and procedures under which annual reinsurance programmes need to be framed as required by IRDA guidelines on corporate governance.

"The companies should bring before the boards of the companies the deviations from reinsurance programmes along with details of cumulative risk exposure for approval," the CAG said in its report.

According to findings of the CAG, there was no formal system in place for empanelment and selection of reinsurance brokers and in some cases; business was placed with reinsurers who did not possess BBB ratings as stipulated by IRDA.

Additionally, sums amounting to Rs 24.36 crore could not be recovered from reinsurers who had gone into liquidation. A sum of Rs 42.91 crore could not be recovered from reinsurers for over six years.