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

Surya General Insurance Ltd proposes to wind up only its marine class while continuing other classes. Under section 58 of the Insurance Act, 1938, what is the correct route?

The insurer must prepare a scheme and submit it for confirmation of the Tribunal under section 58. The scheme must provide for allocation and distribution of assets and liabilities between classes and for the future rights of policy-holders. A mere board resolution is not enough.

  1. AA scheme is prepared and submitted for confirmation of the Tribunal, providing for allocation of assets and liabilities and future rights of policy-holdersCorrect
  2. BThe company may simply close the class by a board resolution
  3. CThe Authority alone may wind up the class by order without any scheme
  4. DA scheme is submitted to the Central Government for confirmation

Explanation

Section 58(1) allows a scheme for partial winding up of a class of business to be prepared and submitted for confirmation of the Tribunal. Sub-section (2) requires the scheme to provide for allocation of assets and liabilities between classes and future rights of policy-holders. A board resolution or Central Government confirmation is not the prescribed route.

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