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

A life insurer's valuation shows a surplus of Rs 80 crore. It writes participating policies and the Authority has not specified a lower sum for the shareholders' share. Under the second proviso to Section 49(1), what is the highest share of this surplus that can be allocated to or reserved for shareholders, including any guaranteed dividend?

The ceiling is Rs 8 crore. The second proviso to Section 49(1) limits the shareholders' share, including any guaranteed dividend, to ten percent of the surplus in the case of participating policies, and ten percent of Rs 80 crore is Rs 8 crore.

  1. ARs 8 croreCorrect
  2. BRs 16 crore
  3. CRs 40 crore
  4. DRs 80 crore

Explanation

For participating policies the shareholders' share cannot exceed 10 percent of the surplus: 10% of Rs 80 crore = Rs 8 crore. The whole surplus (Rs 80 crore) is permitted only in cases other than participating policies.

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