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

Mr. Rao is managing director of Sagar Life Insurance Ltd, a life insurer. He is invited to become managing director of another life insurer, Tara Life Ltd, and separately a director-level officer of a banking company. Under Section 32A as given, which statement is correct?

He is prohibited from being managing director or other officer of another life insurer, a banking company or an investment company. The sole exception is Authority permission to serve in another life insurer for amalgamating or transferring business between the two insurers.

  1. AHe may hold all positions if the boards of the three companies agree
  2. BHe is barred from being managing director or other officer of another life insurer, a banking company or an investment company, subject to the Authority's permission only for amalgamation or transfer of business between two life insurersCorrect
  3. CHe is barred only from the banking company role, and the other life insurer role is always permitted
  4. DThe bar applies only if shareholding exceeds a prescribed limit

Explanation

Section 32A(1) bars such an officer from holding office in another life insurer, a banking company or an investment company. The only proviso lets the Authority permit a role in another life insurer for amalgamating or transferring business. Board consent is irrelevant, so the first option is wrong.

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