The Life Insurance Corporation of India has engaged the services of Deloitte & Touche Tohmatsu India Pvt Ltd to check the financial health of the organisation at the behest of the finance ministry.

The agency will carry out a performance audit of the country's largest state insurance company.

The Centre wants to identify the implications of guarantees given to the insurer. It also wanted to assess how the corporation's assets matched its liabilities at different points in time, LIC Chairman S B Mathur told Business Standard.

The ministry has also asked the General Insurance Corporation of India to undertake a similar financial health check, especially in light of the demerger of the four general insurance subsidiaries.

The report on LIC is expected by mid-July. The appointment of Deloitte & Touche comes at a time when the Insurance Regulatory and Development Authority is questioning LIC's solvency.

The tussle is largely between the government and the IRDA over the share capital of the state insurer and the need for LIC's capital and reserves to increase by a significant proportion.

Explaining the mandate given to the firm, Mathur said, "Deloitte will identify the changes we should bring about in our investment strategy and methodology."

The report was also expected to ascertain whether the way decisions were taken was structurally adequate or needed to be changed, he added.

LIC being a public sector enterprise, its management often undertakes an audit check because it also comes under the Controller General of Accounts and other government bodies, as well as the IRDA.

"The government, however, wants an independent body over and above the IRDA and statutory auditors to make a financial assessment of the corporation," Mathur explained.

There has been debate over the solvency of LIC on the back of guarantees issued to policyholders in the past because yields on investments have fallen sharply.

While LIC assumes that it is solvent largely on the back of the sovereign guarantees on policies, the insurance regulator feels otherwise because it wants the state insurer's capital to match the size of its business.