Mataracy
VIP Contributor
Under insurance decree; insurance made provision on nature, scope and level of investments of insurance companies. The asset of the insurer must be equivalent to the funds as shown in the balance sheet and the revenue accounts of the insurer.
The assets of the insurer shall be invested in the following prescribed instruments: security specified under the Trustees investments Act (that is, government securities and commercial stocks and bonds of quoted companies); shares in other securities of a co-operative society registered under a law approved by the commission; loans on life polices within their surrender values, cash deposit in or bills of exchange accepted by licences banks.
Furthermore, the companies are required to invest at least 15 percent of their fund in government securities; and in respect of investment in real property not more than 25 percent of it's assets for general insurance business, and not more than 35 percent of its assets in the case of life insurance business.
Fro the foregoing provisions on investment portrays that the insurance companies have no flexibility or unfettered discretion in the investment of their finds. They cannot for instance, invest in a highly yielding private company or other attractive investments unless otherwise prescribed by the government.
By being compelled to invest a significant proportion of their funds in gilt- edge securities ( hovernment securities) their returns on investments would invariably be low.
It should be notedbthat Government Securities, although highly secured ans marketable are relatively low yielding.
Sorry for taken much of your time its because i wanted explain in detail.
The assets of the insurer shall be invested in the following prescribed instruments: security specified under the Trustees investments Act (that is, government securities and commercial stocks and bonds of quoted companies); shares in other securities of a co-operative society registered under a law approved by the commission; loans on life polices within their surrender values, cash deposit in or bills of exchange accepted by licences banks.
Furthermore, the companies are required to invest at least 15 percent of their fund in government securities; and in respect of investment in real property not more than 25 percent of it's assets for general insurance business, and not more than 35 percent of its assets in the case of life insurance business.
Fro the foregoing provisions on investment portrays that the insurance companies have no flexibility or unfettered discretion in the investment of their finds. They cannot for instance, invest in a highly yielding private company or other attractive investments unless otherwise prescribed by the government.
By being compelled to invest a significant proportion of their funds in gilt- edge securities ( hovernment securities) their returns on investments would invariably be low.
It should be notedbthat Government Securities, although highly secured ans marketable are relatively low yielding.
Sorry for taken much of your time its because i wanted explain in detail.
