Tribhuvan University
Faculty of Management
Office of the Dean
Bachelor of Business Management (BBM)
Course Description
:This course contains introd uction, accounting for premium, accounting for reinsurance, accounting for claim, accounting for management expenses, accounting for treasury management, concept of a ctuarial valuation, use of technology in insurance sector, product design and development, internal control and compliance, accounting for control, preparation of financial statements and analysis thereon.
Course Objective
:The objectives of the course are to provide the students with the basic knowledge required to handle the accounting functions of insurance business . On completion of this course the students will be able to gai n the knowledge of total insurance accounting practices of the Insurance Sector. The course further aims at providing knowledge required to analy ze financial statements of Insurance Business. Course Description This course contains introd uction, accounting for premium, accounting for reinsurance, accounting for claim, accounting for management expenses, accounting for treasury management, concept of a ctuarial valuation, use of technology in insurance sector, product design and development, internal control and compliance, accounting for control, preparation of financial statements and analysis thereon.
Course Contents:
Lecture hours show the approximate classroom time allocated to each unit.
Unit 1. Introduction
- Concept of insurance, Types of Insurance: life insurance, general i nsurance, reinsurance and micro insurance
- Regulatory b ody (Nepal Insurance Authority)
- Evolution of insurance industry, d evelopment of insurance industry in Nepal
- Meaning, nature, objectives, importance and functions of insurance
- Opportuni ties and c hallenges of Insurance Sector in Nepal
Unit 2. Nepal Insurance Authority
- Function, duties and p ower of the insurance authority, role of i nsurance authority in development of insurance sector in Nepal
- L icensing of insurance business, reinsurance business, agency, brokers and surveyors
Unit 3. Product Design and Development
- Designing of l ife insurance products : Term insurance, t erm insurance with return of premium, Unit linked insurance plans, Endowment plans, Money back policy, Whole life insurance, Group life insurance, child insurance plans, Retirement plans.
- Non-life Insurance products : Motor insurance, Health i nsurance, Marine insurance, Aviation insurance, Engineering insurance, Property insurance, Travel insurance, Miscellaneous insurance, crop and cattle insurance
- Approval procedures, role of ac tuary
- Marketing strategies , Agency management, Appointment proc edures of surveyors. Agent commission and s urveyors fee and accounting treatment thereon.
Unit 4. Basic Accounting Concepts
- Basic accounting principles, assumptions and conventions, accounting rules and classifications of accounts, procedures, functions and users of accounting
- double entry system of book keeping, journal, ledger and trial balance.
Unit 5. Non-Life Insurance Business
- Terms and techniques used in insurance, their computation and accounting : Underwriting results, premium register, written premium, earned premium, unearned premium, gross premium, net premium, , co-insurance, reserving in general insurance, technical reserves, unexpired risk reserves, claim register, claim and claim handling costs, intimated claim, gross claim, claim recovery, net claim, outstanding claim, incurred claim, incurred but not reported claim, reinsurance premium ceded and accepted, acquisition cost, deferred acquisition cost, net commission agent commission, reinsurance commission and profit commission service charge (regulation fee) to Insurance Authority allocation of management expense, investment and other income, catastrophic premium etc.,
Unit 6. Life Insurance Business
- Terms and techniques used in life their computation and accounting: Life Insurance fund, policy register, Types of premium from determination perspective: Gross premium v s.
- Net premium, office premium/level premium , Types of premium from accounting perspective: First premium, renewal premium, first year premium, single premium, collection of deposit and advance premium, agents commission and incentive commission, medical examination fee, Concept of claim procedures , claim register, Accounting for claim: Maturity claim , partial maturity claim, surrender claim , death claim, paid up value, annuity payments, netting of claims, Bonus paid to policyholder, tax treatment as final withholding tax, accounting for claim receivable from Reinsurance and claim paid to other insurance company.
- Accounting t reatment of outstanding claim ( including IBNR and IBNER). A ccounting process for loan against policies, allocation of management expense, investment and other income, catastrophic premium etc., service charge (regulation fee) to Insurance
- Authority, reserving in life insurance.
Unit 7. Accounting for Reinsurance
- Concept and importance
- various types of reinsurance arrangements: facultative reinsurance and treaty reinsurance, Advantages and disadvantages of reinsurance, reinsurance regulation in Nepal, Characteristics of reinsurance accounting, reinsurance accounting system, Catastrophic reinsurance, Bordeaux. Accounting treatment of premium ceded and accepted, reinsurance claim receiv able and payable and final settlement made thereon, reinsurance commission and profit commission , impact of foreign exchange thereon.
Unit 8. Internal Control mechanism
- Reconciliation of transactions with banks, reinsurer and other parties
- Preparation of bank reconciliation statement for the transaction with bank. Audit committee, Compliance Department, Authority Internal Audit , Statutory Audit and Tax Audit.
Unit 9. Preparation of Financial Statements
- Regulations on insurance accounting, concept and importance
- Statement of profit and loss and other comprehensive income (Income statement)
- Statement of Revenue account, Statement of financial position/balance sheet
- Statement of cash flow statement
- Statement of changes in equity, summary o f significant accounting policies and notes to account.
Unit 10. Financial Statements Analysis
- Concepts and importance
- Ratio a nalysis: concept, importance and limitations
- Different ratio analysis tools (liquidity, solvency, efficiency and profitability) and their interpretation
Suggested Readings:
Guria,R. C., Chakraborty A. K., . Sekar A.R & Pani B. (2010) General Insurance Accounts Preparation And Regulation Of Investment, Insurance Institute of India . Gupta, R.L. & Radhaswamy, M. (2008) Advanced Accounting, New Delhi: S. Chand and Sons. Life Insurance Finance, Insurance Institute of India G- Block, Plot No. C-46, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051