Describe investment banking.

Investment accounting  

Investments are assets that an insurer gets from the income that is earned through dividends, rent and interest etc.. Any insurance company makes investment, from the income earned not just to fulfill the legal requirements but also to meet any unforeseen incidents and claims. There are two main sources of investable funds namely:  

1) Surplus funds the arise from the business.  

2) Income that arise from interest and dividends on existing investments.  

The section 27B, 27C and 27D of the Insurance Act, 1938 has set certain norms for insurance companies to regulate the investment of their funds. The IRDA‟s regulation for preparation of financial statements has set some procedures for determining the value of investments. More over the IRDA under the IRDA Investment and Amendment Regulations issued detailed guidelines to insurers for making investments. IRDA does not allow the insurers to do any investments abroad. Accounting entries for investments are included for certain investments like buying/selling investments, receipts, interest, dividends, rent, and recording impairments, write off and write down of certain investments.

According to the section 27 of the Insurance Act 1938 the funds that the company controls has to be invested in some specified securities. The assets that are related to, Annuity business, Pension business and Linked Life Insurance business may not form a part of the controlled fund.  

There are separate rules that are formulated for investing funds that is earned from Pension business and Annuity business.  

The funds that are related to Unit Linked Insurance business can be invested as per the investment pattern that is offered to the policyholders and approved by them. But the total investment made in other categories other than the approved category of investments cannot exceed 25 % of the fund.