Investment of Insurance Companies And IRDA Regulations MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Investment of Insurance Companies And IRDA Regulations, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Investment of Insurance Companies And IRDA Regulations MCQs are designed to help you grasp the core concepts and excel in solving problems.

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Investment of Insurance Companies And IRDA Regulations MCQs | Page 11 of 16

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Q101.
How should the accounting of investments be conducted according to Regulation 14(a)?

a.

Based on the insurer's preference

b.

According to the insurer's internal policies

c.

As per the guidelines issued under IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations 2000

d.

As per the insurer's financial advisors' recommendations

Discuss
Answer: (c).As per the guidelines issued under IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations 2000 Explanation:The accounting of investments should be as per the guidelines issued under IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations 2000.
Q102.
What authority does the IRDA have in modifying or changing regulations for insurers?

a.

No authority

b.

Authority to modify or change only on its own initiative

c.

Authority to modify or change only on application by insurers

d.

Authority to modify or change on its own or on application made to it

Discuss
Answer: (d).Authority to modify or change on its own or on application made to it Explanation:The IRDA may, by any general or special order, modify or change the application of certain regulations to any insurer either on its own or on an application made to it.
Q103.
What is the scope of dealing in financial derivatives for insurers according to Regulation 15(a)?

a.

Unlimited

b.

Only in the life insurance business

c.

Only in the general insurance business

d.

To the extent permitted and in accordance with guidelines issued by the Authority

Discuss
Answer: (d).To the extent permitted and in accordance with guidelines issued by the Authority Explanation:Insurers may deal in financial derivatives only to the extent permitted and in accordance with the guidelines issued by the Authority.
Q104.
How should margins or unamortized premiums paid in connection with financial derivatives be treated as per Regulation 15(b)?

a.

Always as "Approved Investments"

b.

Always as "Other than Approved Investments"

c.

As "Approved Investments" only when the derivatives position constitutes a hedge for the underlying investments or portfolio

d.

As "Other than Approved Investments" only when the derivatives position constitutes a hedge for the underlying investments or portfolio

Discuss
Answer: (c).As "Approved Investments" only when the derivatives position constitutes a hedge for the underlying investments or portfolio Explanation:Margins or unamortized premiums paid in connection with financial derivatives shall be treated as "Approved Investments" under certain conditions, specifically when the derivatives position constitutes a hedge for the underlying investments or portfolio.
Q105.
Which of the following is NOT considered an Approved Investment for Life Insurers?

a.

First mortgages on immovable property in another country

b.

Loans secured as required under the Act

c.

Bonds or debentures issued by companies rated AA or above

d.

Immovable property situated in another country

Discuss
Answer: (d).Immovable property situated in another country Explanation:Immovable property situated in another country is explicitly excluded as an Approved Investment for Life Insurers.
Q106.
What additional investments are deemed as approved by the Authority for Life Insurers under Section 27A of the Act?

a.

Only equity shares and preference shares

b.

Only bonds or debentures rated not less than AA

c.

Only loans secured as required under the Act

d.

Loans secured as required under the Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions recognized by RBI

Discuss
Answer: (d).Loans secured as required under the Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions recognized by RBI Explanation:Loans secured as required under the Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions recognized by RBI are deemed as approved investments by the Authority.
Q107.
Under what conditions are bonds or debentures issued by companies considered "Approved Investments" for Life Insurers?

a.

Only if rated AA or above

b.

Only if rated below AA

c.

Only if rated PI or above

d.

Only if unrated

Discuss
Answer: (a).Only if rated AA or above Explanation:Bonds or debentures issued by companies are considered "Approved Investments" for Life Insurers only if rated not less than AA or its equivalent.
Q108.
What is the significance of deposits with banks for Life Insurers?

a.

They are explicitly excluded as approved investments.

b.

They are considered approved investments only if made in fixed deposits.

c.

They are considered approved investments subject to norms and limits approved by the Board of Directors of the insurers.

d.

None of the above

Discuss
Answer: (c).They are considered approved investments subject to norms and limits approved by the Board of Directors of the insurers. Explanation:Deposits with banks are considered approved investments for Life Insurers subject to norms and limits approved by the Board of Directors of the insurers.
Q109.
What types of securities are considered approved investments for General Insurance Companies under sec. 27B(1)?

a.

Only loans secured as per the Insurance Act

b.

Only bonds or debentures issued by companies rated not less than AA

c.

Loans secured as per the Insurance Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions

d.

Only bonds or debentures issued by companies rated below AA

Discuss
Answer: (c).Loans secured as per the Insurance Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions Explanation:Loans secured as per the Insurance Act, rated debentures, equity shares, preference shares, and debt instruments issued by All India Financial Institutions are considered approved investments for General Insurance Companies under sec. 27B(1).
Q110.
Which type of investments are excluded as approved investments for General Insurance Companies under sec. 27B(1)?

a.

First mortgages on immovable property situated in another country

b.

Bonds or debentures issued by companies rated below AA

c.

Immovable property situated in another country

d.

Both a and c

Discuss
Answer: (d).Both a and c Explanation:Both first mortgages on immovable property situated in another country and immovable property situated in another country are excluded as approved investments for General Insurance Companies under sec. 27B(1).
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