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

Mr Rao is managing director of an insurer carrying on life insurance business. He is also proposed as managing director of a bank (banking company). Under Section 32A of the Insurance Act, 1938, which statement is correct?

He cannot be managing director or officer of a banking company. Section 32A bars a life insurer's managing director or officer from such roles, and the Authority's proviso permission applies only to another life insurer for amalgamation or transfer of business, not to banks.

  1. AHe may hold both posts if the bank is a public sector bank
  2. BHe may hold both posts if the insurer's board approves
  3. CHe may hold both posts only with the Authority's permission, as the proviso applies to banks
  4. DHe shall not be a managing director or other officer of a banking company; the Authority's proviso permission covers only another life insurer for amalgamation or transfer of businessCorrect

Explanation

Section 32A(1) 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 proviso lets the Authority permit only a position in another life insurer, for amalgamating or transferring business. So no permission exists for the bank role, making the third option wrong.

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