Investment of assets
27. (1) Every insurer shall invest and at all times keep invested assets equivalent to not less than the sum of-
(a) the amount of his liabilities to holders of life insurance policies in India on account of matured claims, and
(b) the amount required to meet the liability on policies of life insurance maturing for payment in India,
less-
(i) the amount of premiums which have fallen due to the insurer on such policies but have not been paid and the days of grace for payment of which have not expired, and
(ii) any amount due to the insurer for loans granted on and within the surrender values of policies of life insurance maturing for payment in India issued by him or by an insurer whose business he has acquired and in respect of which he has assumed liability,
in the manner following, namely, twenty five per cent of the said sum in Government securities, a further sum equal to not less than twenty five per cent of the said sum in Government securities or other approved securities and the balance in any of the approved investments specified in sub-section (1) of section 27A or, subject to the limitations, conditions and restrictions specified in sub-section (2) of that section, in any over investment.
(2) For the purposes of subsection (1),—
(a) the amount of any deposit made under section 7 or section 98 by the insurer in respect of his life insurance business shall be deemed to be assets invested or kept invested Government securities;
(b) the securities of, or guaranteed as to principal and interest by, the Government of the United Kingdom shall be regarded as approved securities other than Government securities for a period of four years from the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), in the manner and to the extent hereinafter specified, namely:—
(i) during the first year, to the extent of twenty-five per cent in value of the sum referred to in sub-section (1);
(ii) during the second year, to the extent of eighteen and three fourths per cent in value of the said sum;
(iii) during the third year, to the extent of twelve and a half per cent in value of the said sum; and
(iv) during the fourth year, to the extent of six and a quarter per cent in value of the said sum:
Provided that, if the Authority so directs in any case, the securities specified in clause (b) shall be regarded as approved securities other than Government securities for a longer period than four years, but not exceeding six years in all and the manner in which and the extent to which the securities shall be so regarded shall be as specified in the direction;
(c) any prescribed assets shall, subject to such conditions, if any, as may be prescribed, be deemed to be assets invested or kept invested in approved investments specified in sub section (1) of section 27A.
(3) In computing the assets referred to in subsection (1),—
(a) any investment made with reference to any currency other than the Indian rupee which is in excess of the amount required to meet the liabilities of the insurer in India with reference to that currency, to the extent of such excess; and
(b) any investment made in the purchase of any immoveable property outside India or on the security of any such property,
shall not be taken into account:
Provided that nothing contained in this sub section shall affect the operation of sub-section (2):
Provided further that the Authority may, either generally or in any particular case, direct that any investment, whether made before or after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), and whether made in or outside India, shall, subject to such conditions as may be imposed, be taken into account, in such manner as may be specified in computing the assets referred to in sub-section (1) and where any direction has been issued under this proviso copies thereof shall be laid before Parliament as soon as may be after it is issued.
(4) Where an insurer has accepted reassurance in respect of any policies of life insurance issued by another insurer and maturing for payment in India or has ceded reassurance to another insurer in respect of any such policies issued by himself, the sum referred to in subsection (1) shall be increased by the amount of the liability involved in such acceptance and decreased by the amount of the liability involved in such cession.
(5) The Government securities and other approved securities in which assets are under sub-section (1) to be invested and kept invested shall be held by the insurer free of any encumbrance, charge, hypothecation or lien.
(6) The assets required by this section to be held invested by an insurer incorporated or domiciled outside India shall, except to the extent of any part thereof which consists of foreign assets held outside India, be held in India and all such assets shall be held in trust for the discharge of the liabilities of the nature referred to in sub section (1) and shall be vested in trustees resident in India and approved by the Authority, and the instrument of trust under this sub section shall be executed by the insurer with the approval of the Authority and shall define the manner in which alone the subject matter of the trust shall be dealt with.
Explanation.—This sub section shall apply to an insurer incorporated India whose share capital to the extent of one third is owned by, or the members of whose governing body to the extent of one third consists of, members domiciled elsewhere than in India.
Further provisions regarding investments
27A. (1) No insurer shall invest or keep invested any part of his controlled fund otherwise than in any of the following approved investments, namely:
(a) approved securities;
(b) securities of, or guaranteed as to principal and interest by, the Government of the United Kingdom;
(c) debentures or other securities for money issued with the permission of the State Government by any municipality in a State;
(d) debentures or other securities for money issued by any authority constituted under any housing or building scheme approved by the Central or a State Government, or by any authority or body constituted by any Central Act or Act of a State Legislature;
(e) first mortgages on immoveable property situated in India under any housing or building scheme of the insurer approved by the Authority or a State Government;
(f) debentures secured by a first charge on any immoveable property plant or equipment of any company which has paid interest in full for the five years immediately preceding or for at least five out of the six or seven years immediately preceding on such or similar debentures issued by it;
(g) debentures secured by a first charge on any immovable property, plant or equipment of any company where either the book value or the market value, whichever is less, of such property, plant or equipment is more than three times the value of such debentures;
(h) first debentures secured by a floating charge on all its assets of any company which has paid dividends on its ordinary shares for the five years immediately preceding or for at least five out of the six or seven years immediately preceding;
(i) preference shares of any company which has paid dividends on its ordinary shares for the five years immediately preceding or for at least five out of the six or seven years immediately preceding;
(j) preference shares of any company on which dividends have been paid for the five years immediately preceding or for at least five out of the six or seven years immediately preceding and which have priority in payment over all the ordinary shares of the company in winding up;
(k) shares of any company which have been guaranteed by another company, such other company having paid dividends on its ordinary shares for the five years immediately preceding or for at least five out of the six or seven years immediately preceding:
Provided that the total amount of shares of all the companies under guarantee by the guaranteeing company is not in excess of fifty per cent of the paid up amount of preference and ordinary shares of the guaranteeing company;
(l) shares of any company on which dividends of not less than four per cent including bonus have been paid for the seven years immediately preceding or for at least seven out of the eight or nine years immediately preceding;
(m) first mortgages on immovable property situated in India or in any other country where the insurer is carrying on insurance business
Provided that the property mortgaged is not leasehold property with an outstanding term of less than thirty years and the value of the property exceeding by one-third, or if it consists of buildings, exceeds by one-half, the mortgage money;
(n) immovable property situated in India or in any other country where the insurer is carrying on insurance business:
Provided that the property is free of all encumbrances;
(o) loans on life interests, or on policies of life insurance within their surrender values issued by him or by an insurer whose business he has acquired and in respect of which business he has assumed liability;
(p) life interests;
(q) fixed deposits with banks included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) or with co-operative societies registered under the Indian Co-operative Societies Act, 1912 (6 of 1912), or under any other law for the time being in force, the primary object of which is to finance other co-operative societies similarly registered;
(r) debentures of, or shares in co-operative societies registered under the Indian Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force;
(s) such other investments as the Authority may, by notification in the Official Gazette, declare to be approved investments for the purposes of this section.
(2) Notwithstanding anything contained in sub-section (1), an insurer being a company or a co-operative life insurance society as defined in clause (b) of sub-section (1) of section 95, may, subject to the provisions contained in the next succeeding sub-sections, invest or keep invested any part of his controlled fund otherwise than in an approved investment, if-
(i) after such investment, the total amounts of all such investments of the insurer do not exceed fifteen per cent of the sum referred to in sub-section (1) of section 27,
(ii) the investment is made, or, in the case of any investment already made, the continuance of such investment is with the consent of all the directors present at a meeting and eligible to vote, special notice of which has been given to all the directors then in India, and all such investments, including investments in which any director is interested, are reported without delay to the Authority with full details of the investments and the extent of the director’s interest in any such investment.
(3) An insurer shall not out of his controlled fund invest or keep invested in the shares of any one banking company or investment company more than—
(a) two and a quarter per cent of the sum referred to in sub-section (1) of section 27, or
(b) two per cent of the subscribed share capital and debentures of the banking company or investment company concerned,
whichever is less.
(4) An insurer shall not out of the controlled fund invest or keep invested in the shares or debentures of any one company other than a banking company or investment company more than-
(a) two and a quarter per cent of the sum referred to in sub-section (1) of section 27, or
(b) ten per cent. of the subscribed share capital and debentures of the company,
Whichever is less:
Provided that nothing in this sub section shall apply to any investment made with the previous consent of the Authority by an insurer, being a company with a view to forming a subsidiary company carrying on insurance business.
(5) An insurer shall not out of his controlled fund invest or keep invest any sum in the shares or debentures of any private limited company.
(6) Where an investment is in partly paid up shares, the uncalled liability on such shares shall be added to the amount invested for the purpose of computing the percentages referred to in clause (a) of sub section (3) and clause (a) of subjection (4).
(7) Notwithstanding anything contained in subsections (3) and (4), where new shares are issued to the existing shareholders by a company the existing shares of which are covered by Clause (i) or CIause (k) or Clause (l) of subjection (1) and of which an insurer is already a shareholder, the insurer may subscribe to such new shares:
Provided that the proportion of new shares subscribed by him does not exceed the proportion which the paid up amount on the shares held by him immediately before such subscription bears to the total paid up capital of the company at the time of such subscription
(8) If, on an application submitted through the Controller the Central Government is satisfied that special grounds exist warranting such exemption, the Central Government may for such period, to such extent and in relation to such particular investments and subject to such conditions as maybe specified by it in this behalf, exempt an insurer from all or any of the provisions of sub-sections (3), (4) and (7).
(9) An insurer shall not keep more than three per cent. of the controlled fund in fixed deposit or current deposit, or partly in fixed deposit and partly in current deposit, with any one banking company or with any one comparative society registered under the Insurance Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being us force and doing banking business:
Provided that in applying this sub section to the amount in deposit with banking on any day all the premiums collected by that company on behalf of the insurer during the preceding thirty days shall be excluded:
Provided further that the Authority may permit a co operative life insurance society as defined in C1ause (b) of sub section (1) of Section 95 to keep more than three per cent. of its controlled fund in fixed deposit with any co¬operative society referred to in this subsection, if the fixed deposit is secured by a first mortgage on any immoveable property.
(10) All assets forming the controlled fund, not being Government securities or other approved securities in which assets are to be invested or held invested in accordance with Section 27, shall (except for a part thereof not exceeding one tenth of the controlled fund in value which may, subject to such conditions and restrictions as may be prescribed, be offered as security for any loan taken for purposes of any investment), be held free of any encumbrance, charge, hypothecation or lien.
(11) If at any time the Authority considers any one or more of the investments constituting an insurer's controlled fund to be unsuitable or undesirable, the Authority may, after giving the insurer an opportunity of being heard, direct him to realise the investment or investments, and the insurer shall comply with the direction within such time as may be specified by the Authority.
(12) Every insurer in existence at the ‘commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), whose investments or any part thereof at such commencement contravene or contravenes any of the provisions of this section, shall, within ninety days from such commencement, submit to the Authority a report specifying in all such investments, and if the Authority is satisfied that it will not be in the interests of the insurer or any class of insurers generally to realise any such investments, it may, by order direct that the provisions of this section [other than the provisions contained in sub-section (11) shall not apply in relation to any such investments or to any class of investments generally for such period or periods as may be specified in the order.
(13) Without prejudice to the powers given to the Authority by subsection (11), nothing contained in this section shall be deemed to require any insurer to realise any investment made in conformity with the provisions of subsection (1) after the commencement of this Act which after the making thereof, has ceased to be an approved investment within the meaning of this section.
(14) Nothing contained in this section shall be deemed to affect in any way the manner in which any moneys relating to the provident fund of any employee or to any security taken from any employee or over moneys of a like nature are required to be held by or under any Central Act, or Act of a State Legislature.
Explanation.- In this section "controlled fund" means-
(a) in the case of any insurer specified in sub-clause (a) (ii) or sub-clause (b) of Clause (9) of section 2 and carrying on life insurance business-
(i) all his funds, if he carries on no other class of insurance business;
(ii) all the funds appertaining to his life insurance business if he carries on some other class of insurance business also; and
(b) in the case of any other insurer carrying on life insurance business,-
(i) all his funds in India, if he carries on no other class of insurance business;
(ii) all the funds in India appertaining to his life insurance business if he carries on some other class of insurance business also;
but does not include any fund or portion thereof in respect of which the Authority is satisfied that such fund or portion thereof, as the case may be, is regulated by the law of any country outside India or in respect of which the Authority is satisfied that it would not be in the interest of the insurer to apply the provisions of this section.
Further provisions regarding investments.
27 B. (1) No insurer carrying on general insurance business shall, after the commencement of the Insurance (Amendment) Act, 1968 (62 of 1968), invest or keep invested any part of his asset otherwise than in any of the following approved investments, namely:
(a) the investment specified in clauses (a) to (e), (n), (q) and (r) of sub¬-section (1) of Sec. 27A;
(b) debentures secured by a first charge on any immoveable property, plant or equipment of any company which has paid interest in full for the three years immediately preceding or for at least three out of the four or five years immediately preceding on such or similar debentures issued by it;
(c) debentures secured by a first charge on any immoveable property, plant or equipment of any company where either the book value or the market value, whichever is less, of such property, plant or equipment is more than twice the value of such debentures;
(d) first debentures secured by a floating charge on all its assets or by a fixed charge on fixed assets and floating charge on all other assets of any company which has paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding the date of the investment;
(e) preference shares of any company which has paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding;
(f) preference shares of any company on which dividends have been paid for the three years immediately preceding or for at least three out of the four or five years immediately preceding and which have priority in payment over all the equity shares of the company in winding up;
(g) shares of any company which have been guaranteed by another company, such other company having paid dividends on its equity shares for the three years immediately preceding or for at least three out of the four or five years immediately preceding:
Provided that the total amount of shares of all the companies under that guarantee by the guaranteeing company is not in excess of fifty percent. of the paid up amount of preference and equity shares of the guaranteeing company;
(h) shares of any company on which dividends of not less than four per cent including bonus have been paid for the three years immediately preceding or for at least three out of the four or five years immediately preceding;
(i) first mortgages on immoveable proper situated in India or in any other country where the insurer is carrying on insurance business:
Provided that the property mortgaged is not lease hold property with an outstanding term of less than fifteen years and the value of the property exceeds by one third, or if it consists of buildings, exceeds by on-half, the mortgage money;
(j) such other investments as the Authority may, by notification in the Official Gazette, declare to be approved investments for the purposes of this section.
(2) Any prescribed assets shall, subject to such conditions, if any, as may by prescribed be deemed to be assets invested or kept invested in approved investments specified in sub-section (1).
(3) Notwithstanding anything contained in sub section (1), an insurer may, subject to the provisions contained in the next succeeding sub-sections, invest or keep invested any part of his assets otherwise than in an approved investment specified in subsection (1), if¬-
(i) after such investment, the fatal amounts of all such investments of the insurer do not exceed twenty five per cent of his assets, and
(ii) the investment is made or in the case of any investment already made, the continuance of such investment is with the consent of all the directors, other than the directors appointed under Section 34 C, present at a meeting and eligible to vote, special notice of which has been given to all the directors then in India, and all such investments, including investments in which any director is interested, are reported without delay to the Authority with full details of investments and the extent of the director's interest in any such investment:
Provided that the making, or the continuance, of such investment is not objected to by any director appointed under Section 34 C
(4) An insurer shall not invest or keep invested any part of his assets in the shares of any one banking company or investment company more than¬-
(a) ten per cent of his assets, or
(b) two per cent of the subscribed share capital and Dentures of the banking company
or investment company concerned,
whichever is less.
(5) An insurer shall not invest or keep invested any part of his assets in the shares or debentures of any one company other than a banking company or investment company more than
(a) ten per cent of his assets, or
(b) ten per cent of the subscribed share capital and debentures of the company,
whichever is less:
Provided that nothing in this sub-section shall apply to any investment made by an insurer in the shares of any other insurer if such other insurer is a company within the meaning of Section 3 of the Companies Act, 1956 (1 of 1956) and carries on insurance or re insurance business in India.
(6) An insurer shall not invest or keep invested any part of his assets in the shares or debentures of any private company.
(7) Where an investment is in partly paid up shares, the uncalled liability on such shares shall be added to the amount invested for the purpose of computing the percentages referred to in Clause (a) of sub-section (4) and Clause (a) of sub section (5).
(8) Notwithstanding anything contained in sub sections (4) and (5) where new shares are issued to the existing shareholders by a company, the existing shares of which are covered by Clause (e) or clause (g) or Clause (h) of sub section (1) and of which an insurer is already a share holder, the insurer may subscribe to such new shares:
Provided that the proportion of new snares subscribed by him does not exceed the proportion which the paid up amount on the shares held by him immediately before such subscription bears to the total paid up capital of the company at the time of such subscription
(9) If, on an application submitted to the Authority, he has satisfied that special grounds exist warranting such exemption, he may, for such period, to such extent and in relation to such particular investments and subject to such conditions as may be specified by him in this behalf, exempt an insurer from all or any of the provisions of sub sections (4), (5) and (8).
(10) An insurer shall not keep more than ten per cent. of his assets in fixed deposit or current deposit, or partly in fixed deposit and partly in current deposit, with any one banking company or with any co operative society registered under the Co operative Societies Act, 1912 ( 2 of 1912), or under any other law for the time being in force and doing banking business:
Provided that in applying this sub section to the amount in deposit with a banking company on any day, all the premiums credited during the preceding sixty days, to the account of the insurer with such banking company and the amounts deposited, during the preceding thirty days, by such insurer with that banking company for payment of claims or out of re insurance recoveries, shall be excluded.
(11) All assets shall (except for a part thereof not exceeding one tenth of the total assets in value which may, subject to such conditions and restriction as may be prescribed, be offered as security for any loan taken for purposes of any investment or for payment of claims, or which may be kept as security deposit with the banks for acceptance of policies) be held free of any encumbrance, charge, hypothecation or lien.
(12) If at any time the Authority considers any one or more of the investments constituting an insurer's assets to be unsuitable or undesirable, he may, after giving the insurer an opportunity of being heard, direct the insurer to realize the investment or investments, and the insurer shall comply with the direction within such time as may be specified in this behalf by the Authority.
(13) Every insurer in existence at the commencement of the insurance (Amendment) Act, 1968, whose investments or any part thereof at such commencement do or does not fulfill the requirements of this section, shall, within ninety days from such commencement, submit to the Authority a report specifying all such investments, and, if the Authority is satisfied that it will not be in the interest of the insurer or any class of insurers generally to realise any such investments, he may, by order direct that the provisions of this section, other than the provisions contained in sub-section (12), shall not apply in relation to any such investments or to any class of investments generally for such period or periods as may be specified in the order.
(14) Without prejudice to the powers conferred on the Authority by sub¬section (12), nothing contained in this section shall be deemed to require any insurer to realise any investment made in conformity with the provisions of sub section (1) after the commencement of the Insurance (Amendment) Act, 1968(62 of 1968), which, after the making thereof, has ceased to be an approved investment within the meaning of this section.
(15) Nothing contained in this section shall be deemed to affect in any way the manner in which any moneys relating to the provident fund of any employee or to any security taken from any employee or other moneys of a like nature are required to be held by or under any Central, Provincial or State Act.
(16) In this section, unless the context otherwise requires, "assets" means-
(a) in the case of an insurer carrying on life insurance business in India, all his assets required to be shown under the column "Other Classes of Business" in the balance sheet in Form A, in Part II of the First Schedule, but excluding any items against the head "Other Accounts (to be specified)";
(b) in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of C1ause (9) of Sec. 2, who is not carrying on life insurance business in India, all his assets required to be shown in the balance sheet in Form A in Part II of the First Schedule but excluding any items against the head "Other Accounts (to be specified)"; and
(c) in the case of any other insurer, the assets required to be shown in the statement in Form AA, in Part II of the First Schedule, but excluding office furniture,
but does not include any assets specifically held against any fund or portion thereof in respect of which the Authority is satisfied that such funds or portion thereof, as the case may be, is regulated by the law of any country outside India or in respect of enrich the Authority is satisfied that it would not be in the interest of the insurer to apply the provisions of this section.
Prohibition of investment of funds outside India
27C. (1) Without prejudice to anything contained in sections 27, 27A and 27B, the Authority may, in the interests of the policy-holders, specify by the regulations made by it, the time, manner and other conditions of investment of assets to be held by an insurer for the purposes of this Act.
(2) The Authority may give specific directions for the time, manner and other conditions subject to which the funds of policy-holders shall be invested in the infrastructure and social sector as may be specified by regulations made by the Authority and such regulations shall apply uniformly to all the insurers carrying on the business of life insurance, general insurance, or re-insurance in India on or after the commencement of the Insurance Regulatory and Development Authority Act, 1999.
(3) The Authority may, after taking into account the nature of business and to protect the interests of the policy-holders, issue to an insurer the directions relating to the time, manner and other conditions of investment of assets to be held by him:
Provided that no direction under this sub-section shall be issued unless the insurer concerned has been given a reasonable opportunity of being heard
Statement of investment of assets
28. (1) Every insurer carrying on the business of life insurance shall every year, within thirty-one days from the beginning of the year submit to the Authority a return showing as at the 31st day of December of the preceding year the assets held invested in accordance with Section 27 and all other particulars necessary to establish that the requirements of that section have been complied with, and such return shall be certified by a principal officer of the insurer.
(2) Every such insurer shall also furnish, within fifteen days from the last day of March, June, and September, a return certified as aforesaid showing as at the end of each of the said months the assets held invested in accordance with Sec. 27.
(2A) In respect of the Government securities and other approved securities invested and kept invested in accordance with sub-section (1) of Section 27 an insurer shall submit along with the returns referred to in sub sections (1) and (2) a certificate, where such assets are in the custody of a banking company, from that company, and in any other case from the chairman, two directors and a principal officer, if the insurer is a company, or otherwise from a principal officer of the insurer to the effect that the securities are held free of any encumbrance, charge, hypothecation, or lien, and every such certificate after the first shall also state that since the date of the certificate immediately preceding all the securities have been so held.
(2B) In respect of the assets forming the controlled fund within the meaning of Section 27A, and which do not form part of the Government securities and approved securities invested and kept invested in accordance with Section 27, an insurer shall submit, along with the returns referred to in sub sections (1) and (2), a statement, where such assets are in the custody of a banking company, from that company, and, in any other case, from the chairman, two directors and a principal officer if the insurer is a company, or from a principal officer of the insurer if the insurer is not a company, specifying the assets, which are subjected to any charge and certifying that the assets, which are held free of any encumbrance, charge, hypothecation, or lien, and every such statement after the first shall also specify the charges created in respect of any of those assets since the date of the statement immediately preceding, and, if any such charges have been liquidated, the date on which they were so liquidated.
(3) The Authority may, at his discretion require any insurer to whom sub-section (1) applies to submit before the 1st day of August in each or any year a return of the nature referred to in subsection (1), certified as required by mat sub section and prepared as at the 30th day of June.
(4) In the case of an insurer having his principal place of business or domicile outside India, the Authority may, on application made by the insurer, extend the periods of fifteen and thirty one days mentioned in the foregoing sub sections to thirty days and sixty days, respectively.
(5) The Authority shall be entitled at any time to take such steps as he may consider necessary for the inspection or verification of the assets invested in compliance with Section 27 or for the purpose of securing the particulars necessary to establish that the requirements of that section have been complied with; the insurer shall comply with any requisition made in this behalf by the Authority, and if he fails to do so within two months from the receipt of the requisition he shall be deemed to have made default in complying with the requirements of this section.
Return of investments relating to controlled fund and changes therein.
28A. (1) Every insurer carrying on life insurance business, shall every year, within thirty one days from the beginning of the year submit to the Authority a return in the form specified by the regulations made by the Authority showing as at the 31st day of March of the preceding year, the investments made out of the controlled fund referred to in Section 27A, and every such return shall be certified by a principal officer of the insurer.
(2) Every insurer referred to in sub section (1) shall also submit to the Authority a return in the form specified by the regulations made by the Authority showing all the changes that occurred in the investments aforesaid during each of the quarters ending on the last day of March, June, September and December within thirty one days from the close of the quarter to which it relates, and every such return shall be certified by a principal officer of the insurers.
Returns of investments relating to the assets and changes therein
28B. (1) Every insurer carrying on general insurance business, shall, every year, within thirty one days from the beginning of the year, submit to the Authority a return in the form specified by the regulations made by the Authority form showing as at the 31st day of March of the preceding year the investments made out of his assets referred to in Section 27B, and every such return shall be certified by a principal officer of the insurer.
(2) Every insurer referred to in sub section (1) shall also submit to the Authority a return in the form specified by the regulations made by the Authority showing all the changes that occurred in the investment aforesaid during each of the quarters ending on the last day of March, June, September and December within thirty one days from the close of the quarter to which it relates, and every such return shall be certified by a principal officer of the insurer.
(3) Every insurer shall submit, along with the returns referred to in sub¬-sections (1) and (2), a statement, where any part of the assets are in the custody of a banking company, from that company, and in any other case, from the chairman, two directors and a principal officer, if the insurer is a company, or from a principal officer of the insurer, if the insurer, is not a company, specifying the assets, which are subject to charge and certifying that the other assets are held free of any encumbrance, charge, hypothecation or lien, and every such statement after the first shall also specify the charges created in respect of any of those assets since the date of the statement immediately preceding, and, if any such charges have been liquidated, the date on which they were so liquidated.
Prohibition of loans
29. (1) No insurer shall grant loans or temporary advances either on hypothecation of property or on personal security or otherwise, except loans on life policies issued by him within their surrender value, to any director, manager, managing agent, actuary, auditor or officer of the insurer if a company, or where the insurer is a firm, to any partner therein, or to any other company or firm in which any such director, manager, managing agent, actuary, officer or partner holds the position of a director, manager, managing agent' actuary, officer or partner:
Provided that nothing contained in this sub section shall apply to loans made by an insurer to a banking company:
Provided further that nothing in this section shall prohibit a company from granting such loans or advances to subsidiary company or to any other company of which the company granting the loan or advance is a subsidiary company eland where any such loan or advance is made out of any life insurance fund the matter shall be reported within thirty days of the making of such loan or advance to the Authority.
(2) The provisions of Section 86D of the Indian Companies Act, 1913 (7 of 1913), shall not apply to a loan granted to a director of an insurer being a company, if the loan is one granted on the security of a policy on which the insurer bears the risk and the policy was issued to the director on his own life, and the loan is within the surrender value of the policy.
(3) Subject to the provisions of sub section (1), no insurer carrying on life insurance business shall grant—
(a) any loans or temporary advances either on hypothecation of property or on personal security or otherwise, except such loans as are specified in sub section (1) of Section 27A;
(b) temporary advances to any chief, special or insurance agent to facilitate the carrying out of his functions as such except in cases where such advances do not exceed in the aggregate—
(i) in the case of a chief agent, the overriding renewal commission earned by him during the year immediately preceding,
(ii) in the case of special agent, the renewal commission earned by him during the year immediately preceding,
(iii) in the case of an insurance agent, the renewal commission earned by him during the year immediately preceding.
Explanation. The temporary advance referred to in clause (b) of this sub¬-section shall also be admissible in the case of any special agent or insurance agent newly appointed, but such advance—
(a) shall be repayable within two years from the date on which such special agent or insurance agent was first appointed, and
(b) shall not exceed, in the case of the special agent, five hundred rupees, and, in the case of the insurance agent, one hundred rupees,
and the total amount of all advances so made shall not exceed ten thousand rupees in the case of any insurer whose business in force is one crore of rupees or more and five thousand rupees in any other case.
(4) Every loan or advance existing at the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), which contravenes the provisions of sub¬section (3) shall be notified by the insurer to the Authority within thirty days of such commencement and shall notwithstanding any contract to the contrary be repaid within one year from commencement.
(5) Where any event occurs giving rise to circumstances, the existence of which at the time of the grant of any subsisting loan or advance would have made such grant a contravention of this section, such loan or advance shall, notwithstanding anything in any contract to the contrary, be repaid within three months from the occurrence of such event.
(6) In case of default in complying with the provisions of sub section (4) or subsection (5) the director, manager, auditor, actuary, officer or partner, or the chief, special or insurance agent concerned shall, without prejudice to any other penalty which he may incur, cease to hold office under, or to act for, the insurer granting the loan on the expiry of the said period of one year or three months, as the case may be.
Liability of directors, etc. for loss due to contraventions of Sections 27, 27¬A and 29
30. If by reason of a contravention of any of the provisions of Section 27, Section 27A, Section 27B or Section 29, any loss is sustained by the insurer or by the policy holders, every director, manager, managing agent, officer or partner who is knowingly a party to such contravention shall, without prejudice to any other penalty to which he may be liable under this Act, be jointly and severally liable to make goal the amount of such loss.
Assets of insurer how to be kept
31. (1) None of the assets in India of any insurer shall, except in the case of deposits made with the Reserve Bank of India under Section 7 or Section 98 or in so far as assets are required to be vested in trustees by sub-section (4) of Section 27, be kept otherwise than in the name of a public officer approved by the Authority, or in the corporate name of the undertaking, if a company, or in the name of the partners, if a firm, or in the name of the proprietor, if an individual.
(2) Nothing contained in this section shall be deemed to prohibit the endorsement in favour of a banking company of any security or other document solely for the purpose of collection or for realization of interest, bonus or dividend.
Provisions relating to managers, etc
(31)A. (1 ) Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913), or in the articles of association of the insurer, if a company, or in any contract or agreement, no insurer shall after expiry of one year from the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950),
(a) be managed by a company or a firm, or
(b) be directed or managed by, or employ as manager, or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus or a share in the valuation surplus in respect of the life insurance business of the insurer, or
(c) be directed or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus in respect of the general insurance business of the insurer:
Provided that nothing in this sub section shall be deemed to prohibit-¬
(i) the payment of commission to a chief agent, special agent or an insurance agent, in respect of life insurance business procured by or through him;
(ii) the payment of commission to a principal agent or an insurance agent in respect of general insurance business procured by or through him;
(iii) the payment of commission, with the approval of the Central Government and for such period as it may determine, to a person not being an officer of an insurer who was, on the 1st November, 1944, employing on behalf of an insurer, chief agents or special agents and continues so to do in respect of insurance business procured by or through him;
(iv) the employment of any individual in a clerical or other subordinate capacity who, as an insurance agent, receives commission In respect of insurance business procured by him;
(v) the employment as an officer of any individual who receives renewal commission in respect of life insurance business procured by him in his capacity as an insurance agent or as an employer of agents before such employment, or before the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), whichever is later;
(vi) the payment of a share in the profits of general insurance business;
(vii) the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration.
(2) Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913), or in the articles of association of the insurer, being a company, or in any contract or agreement, no manager, managing director or any other person concerned in the management of an insurer's business shall be entitled to nominate a successor to his office, and no person so nominated, whether before or after the commencement of the Insurance (Amendment) Act, 1950 (47 of 1950), shall be entitled to hold or to continue in such office.
(3) If in the case of any insurance company provision is made by the articles of association of the company
or by an agreement entered into between any person and the company for empowering a director or manager or other officer of the company to assign his office to any other person, any assignment of office made in pursuance of the said provision, shall, notwithstanding anything to the contrary contained in the said provisions or in Section 86B of the Indian Companies Act, 1913 (7 of 1913), be void.
(4) No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any provision of this section.
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