Section 27 of IA : Section 27: Investment Of Assets

Explanation using Example

Imagine a life insurance company, "SecureLife," operating in India. According to Section 27 of the Insurance Act, 1938, SecureLife must invest and maintain a certain amount of its assets to ensure that it can meet its obligations to policyholders.

For example, SecureLife has a total liability of ₹100 crore to policyholders for matured claims and policies maturing this year. They must invest at least ₹50 crore (50% of the liability) in government securities or other approved securities. The remaining amount can be invested in other approved investments as per regulatory guidelines.

If SecureLife also has ₹5 crore in unpaid premiums with grace periods not yet expired, they can deduct this amount from their required investment. Additionally, if SecureLife has provided ₹10 crore in loans within the surrender values of maturing policies, this amount can also be deducted, leaving them with an adjusted liability of ₹85 crore to be invested as per the Act's requirements.

SecureLife must also ensure that these investments are free of encumbrances and, if it's a foreign company, the assets must be held in trust in India. By following these regulations, SecureLife remains compliant with the law and ensures financial security for its policyholders.