Financial statements provide information about the financial
position of an insurer at the end of March 31 of each financial
year. It describes the financial performance and its changes in
the financial year under review. It is the financial analysis of these
numbers, shown in the financial statements, that provides a detailed
understanding of the insurers financial position. The tools required for such an
analysis are provided by compulsory disclosures required to be made under
the Insurance Regulatory and Development Authority (IRDA)
regulations. The inferences and conclusions are to be drawn, depending on the
past trends and of the current financial performance of the insurer; and
that of the market as a whole.
This financial analysis attempts to analyze the internal strengths
and weaknesses of the enterprise and how it has utilized its
resources—both financial and human—to develop the outcomes. It broadly points
out what needs to change, though it cannot say how it should change.
The shifting trends over a period of say, the preceding five years, would
provide a more reliable data to make an evaluation of how the market has
shifted and how the enterprise has handled it. To the IRDA, such an analysis
is an important administrative tool for understanding the quality of
the performance of an insurer better; and enables it to better appreciate
what changes are taking place at the market level, influenced by
other stakeholders in the insurance system.
As such, the conclusion of the financial analysis of an insurer, in
the context of annual market trends, could be put to multiple use,
including making further inspections to locate the systemic deficiencies. Such inspections act as early warning
systems regarding inherent financial weaknesses of insurers and the market as a whole. |
