Kathmandu: The Insurance Act 2079 has a provision of fine upto Rs. 10 lakh against the failure to accomplish financial audit within three months of completion of the financial year.
The Section 87 of the Insurance Act stipulates that all insurance companies must prepare an financial audit report within three months of the end of each financial year. Earlier, there was provision of maximum of Rs.10,000 fine to the insurers in case of failure to abide by the act, bylaws or directives.
If any company is unable to complete the audit within three months after the end of a financial year, additional two months grace can be granted upon valid reason for the delay. Again even within the extended period too the audit report is not finalized then the insurers have to pay a maximum fine of Rs.10 lakh.
If the fiscal audit report is not submitted within the first week of the grace period, a fine of Rs. 50,000 will be slapped. Likewise, a fine of Rs. 1 lakh will be charged for delay from second week to first one month, further Rs. 5 lakh will be fined for a period above 1 month to 3 months. And Rs. 10 lakh fine will be slapped for a period above three months. So, to avoid the hefty penalty, insurers must finanlise their financial audit of each FY by the end of Mangsir month.
The insurers have shown their concern over the provision of hefty fine on the failure of accomplishment of financial audit within stipulated time. They have admitted that due to the valuation report preparation and other technical reason, it’s almost impossible for the life insurers to finalize the financial audit report. A life insurance company must obtain the actuarial valuation report before preparation of the financial audit report. The life insurance companies are unable to settle their account due to the actuarial valuation and the delay in the settlement of reinsurance premium income.
