The Insurance Regulatory and Development Authority (IRDA) on Tuesday relaxed accounting norms for insurance companies to take care of higher liability arising out of enhanced outgo towards gratuity for their employees. The regulator allowed the insurance and reinsurance companies to amortise the additional liability on account of gratuity over five years starting from financial year 2010-11.

Last year, the centre had enhanced gratuity limit for all employees to Rs. 10 lakh from Rs. 3.50 lakh and also revised payment structure of employees of public sector entities. IRDA said these moves would lead to increase in liability on account of gratuity which would in turn affect insurers' profitability. “(This) in turn will impact the insurers' profitability significantly as they need to provide the same in the financial year 2010-11. This will cause a strain on their solvency as well as on their results,” IRDA said. — PTI

Source :- The Hindu