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 14 of 16

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Q131.
According to Regulation 9, what happens to Approved Investments that are downgraded below the minimum prescribed rating?

a.

They are automatically reclassified under 'Other Investments'

b.

They are sold immediately

c.

They are exempt from minimum rating requirements

d.

They are reviewed by the Insurance Regulatory and Development Authority (IRDA)

Discuss
Answer: (a).They are automatically reclassified under 'Other Investments' Explanation:Approved Investments under regulations 4, 5, 6, 7, and 8 that are downgraded below the minimum prescribed rating should be automatically reclassified under the 'Other Investments' category for the purpose of the pattern of investment.
Q132.
According to Regulation 9 vi, what is the requirement for investment in equity shares listed on a registered stock exchange?

a.

They should be actively traded and liquid instruments

b.

They should be thinly traded as per SEBI Regulations

c.

They should be actively traded but need not be liquid

d.

They should be issued by the insurance company itself

Discuss
Answer: (a).They should be actively traded and liquid instruments Explanation:Regulation 9 vi states that investment in equity shares listed on a registered stock exchange should be made in actively traded and liquid instruments, excluding those defined as thinly traded as per SEBI Regulations and guidelines governing mutual funds issued by SEBI from time to time.
Q133.
According to Regulation 9 vii(a), what percentage of investment in debt instruments should be in sovereign debt for life insurers?

a.

Not less than 65%

b.

Not less than 75%

c.

Not more than 5%

d.

Not more than 8%

Discuss
Answer: (b).Not less than 75% Explanation:Regulation 9 vii(a) specifies that not less than 75% of investment in debt instruments in the case of life insurers should be in sovereign debt, AAA or equivalent rating for long term, and sovereign debt, P1 + or equivalent rating for short-term instruments. This applies to segregated funds level in the case of unit-linked business.
Q134.
According to Regulation 9 vii(b), what is the maximum percentage of investment in debt instruments with a rating of A or below for life insurers?

a.

5%

b.

8%

c.

10%

d.

15%

Discuss
Answer: (a).5% Explanation:Regulation 9 vii(b) specifies that not more than 5% of funds under Regulation 3(a) in debt instruments for life insurers should have a rating of A or below or equivalent rating for long term.
Q135.
What emphasis does Regulation 9 viii place on credit ratings?

a.

Credit ratings replace risk analysis

b.

Credit ratings are not important for investments

c.

Appropriate risk analysis should not be conducted

d.

Credit ratings should not replace appropriate risk analysis and management

Discuss
Answer: (d).Credit ratings should not replace appropriate risk analysis and management Explanation:Regulation 9 viii emphasizes that credit ratings should not replace appropriate risk analysis and management on the part of the insurer. The insurer should conduct risk analysis commensurate with the complexity of the products and materiality of other holdings or could refrain from such investment.
Q136.
What is the purpose of Regulation 9 in the context of exposure and prudential norms?

a.

To define exposure norms for investment assets

b.

To limit investments based on exposure norms

c.

To encourage maximum exposure to investee companies

d.

To provide flexibility in investment choices

Discuss
Answer: (b).To limit investments based on exposure norms Explanation:Regulation 9 is designed to limit insurer investments based on exposure norms. It provides exposure norms for different categories of investment assets and specifies maximum exposure limits for a single investee company.
Q137.
According to Regulation 9, what is the maximum exposure limit for a single investee company from all investment assets?

a.

5% of the investment assets

b.

10% of the investment assets

c.

15% of the investment assets

d.

20% of the investment assets

Discuss
Answer: (b).10% of the investment assets Explanation:The maximum exposure limit for a single investee company (equity, debt, and other investments taken together) from all investment assets under Regulation 9 shall not exceed the lower of two criteria: an amount of 10% of the investment assets and an aggregate amount calculated based on certain parameters.
Q138.
What does the exposure norm cover for all funds of Life Insurance business, One Year Renewable Pure Group Term Insurance business, and non-unit reserves of all categories of Unit linked life insurance business?

a.

Only equity investments

b.

Equity, debt, and other investments taken together

c.

Only debt investments

d.

Only unit-linked funds

Discuss
Answer: (b).Equity, debt, and other investments taken together Explanation:The exposure norm for all funds of Life Insurance business, One Year Renewable Pure Group Term Insurance business, and non-unit reserves of all categories of Unit-linked life insurance business covers equity, debt, and other investments taken together.
Q139.
According to Regulation 9, what is the purpose of limiting exposure to a single investee company?

a.

To encourage concentrated investments

b.

To minimize risk and ensure diversification

c.

To increase the profitability of investments

d.

To comply with regulatory requirements

Discuss
Answer: (b).To minimize risk and ensure diversification Explanation:The purpose of limiting exposure to a single investee company, as per Regulation 9, is to minimize risk and ensure diversification of investments. This helps in managing risks associated with concentration in a particular company.
Q140.
What is the significance of Industry sector norms not applying to investments in the Infrastructure facility sector?

a.

Encourages concentration in specific industries

b.

Ensures compliance with NIC classification

c.

Allows flexibility for investments in the Infrastructure facility sector

d.

Promotes diversification across industry sectors

Discuss
Answer: (c).Allows flexibility for investments in the Infrastructure facility sector Explanation:The statement indicates that industry sector norms shall not apply to investments in the Infrastructure facility sector. This allows flexibility for investments in the Infrastructure facility sector, enabling insurers to make investment decisions without being bound by industry sector norms.
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