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

Himalaya Life Ltd's actuarial valuation discloses a surplus of ₹40 crore on participating policies. Under the second proviso to Section 49(1), what is the maximum share of this surplus that can be allocated to or reserved for shareholders, subject also to any sum the Authority specifies?

The maximum is ₹4 crore. The second proviso to Section 49(1) limits the shareholders' share of surplus on participating policies to ten per cent, and ten per cent of ₹40 crore is ₹4 crore, subject also to any lower sum specified by the Authority.

  1. A₹10 crore
  2. B₹4 croreCorrect
  3. C₹20 crore
  4. D₹8 crore

Explanation

The second proviso caps the shareholders' share at ten per cent of the surplus for participating policies. 10% of ₹40 crore is ₹4 crore. ₹10 crore wrongly applies 25%, and ₹20 crore wrongly applies the 50% limit meant for debenture payments.

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