CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part III)
Suraksha Life Insurance Ltd, a life insurer, wants to pay a dividend to its shareholders. Its valuation balance-sheet, submitted to the Authority as part of the abstract under section 15, shows an actuarial surplus of Rs 40 crore. Under section 49 of the Insurance Act, 1938, from which source may the dividend be paid out of the life insurance fund?
The dividend can be paid only from the surplus shown in the valuation balance-sheet, submitted to the Authority with the section 15 abstract, as a result of actuarial valuation of assets and liabilities. Section 49 forbids using any other portion of the life insurance fund for dividends.
- AOnly from the surplus shown in the valuation balance-sheet as a result of actuarial valuation of assets and liabilitiesCorrect
- BFrom any part of the life insurance fund, if the board approves
- CFrom the premium income received during the year, before valuation
- DFrom the paid-up capital of the insurer, with the Authority's later ratification
Explanation
Section 49(1) bars use of the life insurance fund for dividends to shareholders or bonus to policy-holders except a surplus shown in the valuation balance-sheet submitted to the Authority as a result of an actuarial valuation of assets and liabilities. Board approval does not override this restriction, so the first option is wrong to say otherwise.
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