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 6 of 16

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Q51.
What does Regulation 8 specify for re-insurers carrying on reinsurance business in India?

a.

They are exempt from making investments

b.

They should invest in real estate only

c.

They should invest in the same manner as set out in Regulations 7

d.

They are not required to keep invested their investment assets

Discuss
Answer: (c).They should invest in the same manner as set out in Regulations 7 Explanation:Regulation 8 states that every re-insurer carrying on reinsurance business in India should invest and keep invested their investment assets in the same manner as set out in Regulations 7, which outlines the manner of investments for General Insurers.
Q52.
According to Regulation 9, what is the requirement for investments in instruments capable of being rated?

a.

Investments must not be rated

b.

Investments must be rated by any credit rating agency

c.

Investments must be rated by a credit rating agency registered under SEBI Regulations

d.

Investments must be rated by the Insurance Regulatory and Development Authority (IRDA)

Discuss
Answer: (c).Investments must be rated by a credit rating agency registered under SEBI Regulations Explanation:Regulation 9 specifies that all investments in assets or instruments, capable of being rated as per market practice, should be based on the credit rating of such assets or instruments. The rating must be done by a credit rating agency registered under SEBI (Credit Rating Agencies) Regulations 1999.
Q53.
What is the minimum rating required for corporate bonds or debentures to be considered as Approved Investments, according to Regulation 9?

a.

BBB

b.

A

c.

AA

d.

AAA

Discuss
Answer: (c).AA Explanation:Regulation 9 mentions that corporate bonds or debentures rated not less than AA or its equivalent would be considered as Approved Investments.
Q54.
In case investments of grade are not available to meet the requirements, what rating is considered for All India Financial Institutions, as per Regulation 9?

a.

AA

b.

A+

c.

BBB

d.

P1

Discuss
Answer: (b).A+ Explanation:In such cases, Regulation 9 states that the Investment Committee may approve investments in instruments carrying a current rating of not less than 'A+' or equivalent as rated by a credit rating agency registered under SEBI (Credit Rating Agencies) Regulations 1999.
Q55.
What is the significance of the note in Regulation 9 regarding credit ratings?

a.

It sets the maximum premium rates for insurance policies

b.

It outlines the investment strategy for insurance companies

c.

It provides guidelines on the credit ratings of investment instruments

d.

It specifies the minimum sum assured for life insurance policies

Discuss
Answer: (c).It provides guidelines on the credit ratings of investment instruments Explanation:The note in Regulation 9 provides guidelines on the credit ratings of investment instruments, specifying the requirements and considerations for investments capable of being rated.
Q56.
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.
Q57.
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.
Q58.
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.
Q59.
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.
Q60.
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.
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