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

Sahyadri General Insurance Ltd has entered into a reinsurance treaty. The Authority (IRDAI) forms the opinion that the treaty's terms are not favourable to the insurer and are detrimental to the public interest. Under Section 34F of the Insurance Act, 1938, what may the Authority do?

The Authority may, by order, require the insurer to make specified modifications to the treaty, or not to renew it, when renewal next becomes due. It cannot cancel it immediately. Non-compliance is deemed a failure to comply with the Act.

  1. AOrder the insurer to modify the terms, or not to renew the treaty, when renewal next falls dueCorrect
  2. BCancel the treaty immediately with retrospective effect
  3. CRequire the insurer to surrender its certificate of registration
  4. DRefer the treaty to the General Insurance Council for final decision

Explanation

Section 34F(1) lets the Authority, by order, require the insurer to make specified modifications at the time renewal next becomes due, or not to renew the treaty. It does not give power of immediate cancellation, deregistration, or referral to the Council. Failure to comply is deemed a failure to comply with the Act.

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