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Suresh Mathur
Insurance core principle 16 Winding up and exit from the market vis--vis Indian Insurance Act and Companies Act, 1956
Financial Sector Assessment Program 29 December 2010
Section 425 of Companies Act, 1956 provides for 3 modes of winding up voluntary, by or under supervision of the Court Section 53(2) of the Insurance Act, 1938 provides for additional grounds for winding up of insurance companies by Court one of the grounds is that where the insurer is or is deemed to be insolvent (Section 53(2)(b)(iii)) Prescription of procedures upon winding up:
Valuation of assets and liabilities of the insurer (section 55) Application of surplus assets of life insurance fund in liquidation or insolvency (section 56) Return of deposits kept with RBI made under section 7 (section 59) Notice to policyholder of their policy values upon merger (section 60)
Section 52H of Insurance Act provides powers to Central Government to acquire any insurer, if the affairs of the company are detrimental to interests of policyholders or may order merger with another insurance company and approve the scheme of merger - this facilitates merger of troubled insurers with healthier insurers Section 37A of Insurance Act provides for amalgamation of insurance companies by IRDA in the interests of policyholders Provision of minimum solvency margin of Rs.500 million (Section 64VA(1A)) a higher solvency margin of Rs.750 million is however insisted by IRDA