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

Gulf Re Ltd, incorporated in a foreign country, wants to open a branch in India and write both direct motor insurance and reinsurance. Under Section 2C of the Insurance Act, 1938, what is the position?

Gulf Re may carry on only reinsurance through its Indian branch. Section 2C allows a foreign-incorporated body to establish a branch exclusively for reinsurance and prohibits it from carrying on any other class of insurance business, so direct motor insurance cannot be written.

  1. AIt may write any class of business if the branch is approved
  2. BIt may write only life business directly
  3. CIt may carry on only reinsurance, as foreign-incorporated bodies cannot carry on other insurance businessCorrect
  4. DIt may write direct business if it forms an Indian subsidiary within one year

Explanation

Section 2C(1)(c) allows a foreign company to establish a branch in India exclusively for reinsurance business. A proviso further bars a foreign-incorporated body from carrying on any insurance business other than reinsurance. Direct motor insurance is therefore not permitted.

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