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CS Professional · Banking and Insurance - Laws and Practice · Regulatory Framework in Insurance

The registration of Jeevan Raksha Insurance Co. Ltd. was cancelled under Section 3(4)(a) for failing to maintain the required excess of assets over liabilities; cancellation took effect on 1 January. The company restored the required excess by 1 May. Which statement is correct under Section 3?

Revival is at IRDAI's discretion because compliance came within six months of cancellation taking effect. Meanwhile, under Section 3(5B) the insurer cannot enter new contracts, but rights and liabilities under existing policies continue. Revival is not automatic, and winding-up cannot be sought before six months have passed.

  1. ARevival is automatic because the shortfall was cured
  2. BRevival is possible at IRDAI's discretion since it complied within six months of the cancellation taking effect; until then no new contracts may be written, while existing policies continueCorrect
  3. CIRDAI must wind up the company immediately on cancellation
  4. DExisting policies lapse on cancellation, so policyholders must reclaim premiums

Explanation

Section 3(5C) lets the Authority, at its discretion, revive a registration cancelled under clause (a) if compliance occurs within six months of the cancellation taking effect. Section 3(5B) bars new contracts after cancellation but preserves rights and liabilities under earlier contracts. Winding-up application can come only after six months and only if not revived.

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