Page 96 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 6: The Insurance Act, 1938

Provided that in determining the paid-up equity capital specified under clause (i) or clause (ii), Notes
the deposit to be made under section 7 and any preliminary expenses incurred in the formation
and registration of the company shall be excluded:

Provided further that an insurer carrying on business of life insurance, general insurance or re-
insurance in India before the commencement of the Insurance Regulatory and Development
Authority Act, 1999 and who is required to be registered under this Act, shall have a paid-up
equity capital in accordance with clause (i) and clause (ii), as the case may be, within six months
of the commencement of that Act.

6.2.3 Deposits

Let’s take a look at deposits. Every insurer shall, in respect of the insurance business carried on
by him in India, deposit and keep deposited with the Reserve Bank of India in one of the offices
in India of the Bank for and on behalf of the Central Government the amount hereafter specified,
either in cash or in approved securities estimated at the market value of the securities on the day
of deposit, or partly in cash and partly in approved securities so estimated:

(a) In the case of life insurance business, a sum equivalent to one per cent of his total gross
premium written direct in India in any financial year commencing after the 31st day of
March, 2000, not exceeding rupees ten crore;
(b) In the case of general insurance business, a sum equivalent to three per cent of his total
gross premium written in India, in any financial year commencing after the 31st day of
March, 2000, not exceeding rupees ten crore;
(c) In the case of re-insurance business, a sum of rupees twenty crore:
Provided that, where the business done or to be done is marine insurance only and relates
exclusively to country craft or its cargo or both, the amount to be deposited under this sub-
section shall be one hundred thousand rupees only:
Provided further that in respect of an insurer not having a share capital and carrying on only
such insurance business as in the opinion of the Central Government is not carried on ordinarily
by insurers under separate policies, the Central Government may, by notification under Official
Gazette, order that the provisions of this sub-section shall apply to such insurer with the
modification that instead of sum of rupees twenty lakhs or rupees ten lakhs, as the case may be,
the deposit to be made by such insurer shall be such amount, being not less than one hundred
and fifty thousand rupees, as may be specified in the said order.

6.2.4 Audit

You must understand that the balance sheet, profit and loss account, revenue account and profit
and loss appropriation account of every insurer, in the case of an insurer specified in sub-clause
(a)(ii) or sub-clause (b) of clause (9) of section 2 in respect of all insurance business transacted by
him, and in the case of any other insurer in respect of the insurance business transacted by him
in India, shall, unless they are subject to audit under the Indian Companies Act, 1913 (7 of 1913),
be audited annually by an auditor, and the auditor shall in the audit of all such accounts have the
powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities
and penalties imposed on, auditors of companies by section 145 of the Indian Companies Act,
1913.

Notes This Act does not to apply to preparation of accounts, etc., for periods prior to this
Act coming into force.

LOVELY PROFESSIONAL UNIVERSITY 91