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

Nirmaan Life Ltd has a valuation surplus of Rs 80 crore on participating policies. Under the second proviso to section 49(1), what is the highest share of this surplus that may be allocated to or reserved for shareholders, apart from any lower sum the Authority specifies?

The ceiling is Rs 8 crore. Under the second proviso to section 49(1), the shareholders' share of surplus on participating policies can never exceed ten percent of the surplus, and ten percent of Rs 80 crore is Rs 8 crore. The Authority may specify a lower amount.

  1. ARs 40 crore
  2. BRs 16 crore
  3. CRs 8 croreCorrect
  4. DRs 80 crore

Explanation

For participating policies the shareholders' share shall in no case exceed ten per cent of the surplus. 10% of Rs 80 crore is Rs 8 crore. Rs 80 crore would apply only to cases other than participating policies, where the whole may go to shareholders.

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