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CMA Final · Risk Management in Banking and Insurance · Managing Risk in Insurance Business

Kaveri Life Insurance Ltd carries on life insurance business. Its managing director, Mr. Raghunath Iyer, is also invited to join the board as a managing director of Sagar Bank Ltd, a banking company. Under the Insurance Act, 1938 (prohibition of common officers), what is the position?

He cannot hold both posts. The Insurance Act, 1938 bars a managing director or other officer of a life insurer from being a managing director or officer of another life insurer, a banking company or an investment company. The Authority's proviso concession applies only to life insurer amalgamations or transfers.

  1. AHe cannot be a managing director or other officer of a banking company while holding that office in a life insurer, as the Act prohibits itCorrect
  2. BHe may hold both offices freely, since the prohibition applies only to two general insurers
  3. CHe may hold both offices if the banking company is incorporated in India
  4. DHe may hold both offices if he takes no remuneration from the bank

Explanation

Section 32A(1) says a managing director or other officer of an insurer carrying on life insurance business shall not be a managing director or other officer of another life insurer, of a banking company or of an investment company. The only proviso lets the Authority permit a common officer of another life insurer for amalgamation or transfer of business, not for a bank. Remuneration or incorporation place does not alter the bar.

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