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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part I)

A life insurer's actuarial valuation discloses a surplus of ₹80 crore, and the entire surplus is from participating policies. Applying the second proviso to section 49(1), what is the maximum share of this surplus that can be allocated to shareholders?

The maximum is ₹8 crore. For participating policies, section 49(1)'s second proviso caps the shareholders' share at ten per cent of the surplus, and 10% of ₹80 crore is ₹8 crore. The whole surplus could go to shareholders only in other cases.

  1. A₹4 crore
  2. B₹8 croreCorrect
  3. C₹40 crore
  4. D₹80 crore

Explanation

The second proviso says the shareholders' share shall in no case exceed ten per cent of the surplus in case of participating policies. 10% of ₹80 crore = ₹8 crore. ₹80 crore would apply only to cases other than participating policies.

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