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

Himalaya General Insurance Ltd has assets of Rs 800 crore at carrying value. Applying section 27(2) of the Insurance Act, 1938, what is the minimum amount that must be held in Government securities or other approved securities, taking the Government securities portion together with the further portion?

The minimum is Rs 240 crore. Section 27(2) requires twenty per cent of assets in Government securities, which is Rs 160 crore, plus a further ten per cent, Rs 80 crore, in Government or other approved securities. The balance may go to other investments under the regulations.

  1. ARs 160 crore
  2. BRs 240 croreCorrect
  3. CRs 80 crore
  4. DRs 400 crore

Explanation

Twenty per cent of Rs 800 crore is Rs 160 crore in Government securities. A further sum of not less than ten per cent, Rs 80 crore, goes in Government or other approved securities. Together the total is Rs 240 crore. Rs 160 crore ignores the further portion, and Rs 80 crore counts only that portion.

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