Investment of Insurance Companies And IRDA Regulations MCQs

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Investment of Insurance Companies And IRDA Regulations MCQs | Page 4 of 16

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Q31.
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.
Q32.
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.
Q33.
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.
Q34.
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).
Q35.
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).
Q36.
What is the significance of Commercial Papers for General Insurance Companies?

a.

They are excluded as approved investments.

b.

They are considered approved investments only if issued by All India Financial Institutions.

c.

They are considered approved investments if issued by a company or All India Financial Institution with the highest credit rating.

d.

They are treated as "Other than Approved Investments."

Discuss
Answer: (c).They are considered approved investments if issued by a company or All India Financial Institution with the highest credit rating. Explanation:Commercial Papers issued by a company or All India Financial Institution with the highest credit rating are considered Approved Investments for General Insurance Companies.
Q37.
What type of deposits are considered approved investments for both Life and General Insurance Companies under the regulations?

a.

Only fixed deposits as per section 27B (10) of the Insurance Act

b.

Only current accounts with banks

c.

Fixed deposits, current accounts, call deposits, notice deposits, and certificate of deposits with banks included in the Second Schedule to Reserve Bank of India Act 1934

d.

Only call deposits with banks

Discuss
Answer: (c).Fixed deposits, current accounts, call deposits, notice deposits, and certificate of deposits with banks included in the Second Schedule to Reserve Bank of India Act 1934 Explanation:Deposits (including fixed deposits) with banks, such as current accounts, call deposits, notice deposits, and certificate of deposits, included for the time being in the Second Schedule to Reserve Bank of India Act 1934, are considered approved investments for both Life and General Insurance Companies.
Q38.
What is the significance of the LIC Act 1956 regarding investment caps for LIC (Life Insurance Corporation of India)?

a.

LIC can invest up to 20% of the capital in a single company.

b.

LIC is not subject to any investment caps.

c.

LIC Act 1956 allows LIC to invest up to 30% of the capital in a single company.

d.

LIC can hold up to 25% stake in companies.

Discuss
Answer: (d).LIC can hold up to 25% stake in companies. Explanation:The LIC Act 1956 allows LIC to hold up to 25% stake in companies. The government had proposed allowing LIC to invest up to 30% of the capital of a single company in the current financial year.
Q39.
What change has the government approved regarding LIC's investment cap?

a.

The investment cap remains unchanged at 20%.

b.

LIC can now invest up to 30% of the capital in a single company.

c.

LIC's investment cap is reduced to 15%.

d.

LIC's investment cap is increased to 25%.

Discuss
Answer: (d).LIC's investment cap is increased to 25%. Explanation:The government of India has given approval for LIC to increase its investment in companies up to 25% of the capital from the current 20% under special circumstances.
Q40.
How long is the tenure of the Reliance Infrastructure NCOs in which LIC invested?

a.

5 years

b.

8 years

c.

10 years

d.

11 years

Discuss
Answer: (b).8 years Explanation:The Rs. 600-crore NCO issue of Reliance Infrastructure, in which LIC invested, bears a coupon rate of 11.75% p.a. for an 8-year period.
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