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

Himalaya Assurance Ltd has been entering into reinsurance contracts that the Authority believes are likely to be unfavourable to the insurer. The Authority issues an order under Section 34F(2). Which obligation does the order impose on Himalaya?

The insurer must not enter into such reinsurance treaty or contract unless a copy has been furnished to the Authority in advance and the Authority has approved its terms and conditions. Failure to comply is deemed non-compliance with the Act.

  1. AIt must not enter into such a contract unless a copy has been furnished in advance and the Authority has approved its termsCorrect
  2. BIt must file the contract within one year after signing for record only
  3. CIt must obtain approval of the Central Government before signing any contract
  4. DIt must obtain approval of the Executive Committee of the General Insurance Council

Explanation

Under Section 34F(2), where the Authority has reason to believe an insurer is entering or likely to enter unfavourable reinsurance contracts, it may direct the insurer not to enter into them unless a copy is furnished in advance and the Authority approves the terms. Post-signing filing or approval by the Central Government or the Council is not what the section provides.

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