Separation of accounts and funds

Section 10 of the Insurance Act, 1938 deals with separation of accounts and funds. Where the insurer carries on business of more than one of the [following classes, namely, life insurance, fire insurance, marine insurance or miscellaneous insurance], he shall keep a separate account of all receipts and payments in respect of each such class of insurance business [and where the ins The Act came into force on 01 Jul 1939.

(1) Where the insurer carries on business of more than one of the ¹[following classes, namely, life insurance, fire insurance, marine insurance or miscellaneous insurance], he shall keep a separate account of all receipts and payments in respect of each such class of insurance business ²[and where the insurer carries on business of ³[miscellaneous insurance] whether alone or in conjunction with business of another class, he shall, unless the ⁴[Authority] waives this requirement in writing, keep a separate account of all receipts and payments in respect of ⁵[each of such sub-classes of miscellaneous insurance business] as may be ⁶[specified by the regulations]:

Provided that no sub-class of ⁷[miscellaneous insurance business] shall be prescribed under this sub-section if the insurance business comprised in the sub-class consist of insurance contracts which are terminable by the insurer at intervals not exceeding twelve months and under which, if a claim arises, the insurer's liability to pay benefit ceases within one year of the date on which the claim arose.]

(2) Where the insurer carries on the business of life insurance ⁸[all receipts due in respect of such business], shall be carried to and shall form a separate fund to be called the life insurance fund ⁹[the assets of which shall, ¹⁰***, be kept distinct and separate from all other assets of the insurer] and the deposit made by the insurer in respect of life insurance business shall be deemed to be ¹¹[part of the assets of such fund; ¹²[and every insurer shall, within the time limited in sub-section (1) of section 15 in regard to the furnishing of the statements and accounts referred to in section 11, furnish to the Controller a statement showing in detail such assets as at the close of every calendar year duly certified by an auditor or by a person qualified to audit ¹³***:]

Provided that such statement shall, in the case of an insurer to whom section 11 applies, be set out as a part of the balance-sheet mentioned in clause (a) of sub-section (I) of that section:

Provided further that an insurer may show in such statement all the assets held in his life department, but at the same time showing any deductions on account of general reserves and other liabilities of that department:

Provided also that the ¹⁴[Authority] may call for a statement similarly certified of such assets as at any other date specified by him to be furnished within a period of three months from the date with reference to which the statement is called for]].

¹⁵[(2A) No insurer carrying on life insurance business shall be entitled to be registered for any class of insurance business in addition to the class or classes for which he has been already registered unless the ¹⁴[Authority] is satisfied that the assets of the life insurance fund of the insurer are adequate to meet all his liabilities on policies of life insurance maturing for payment.]

¹⁶[(2AA) Where the insurer carries on the business of insurance, all receipts due in respect of each sub-class of such insurance business shall be carried to and shall form a separate fund, the assets of which shall be kept separate and distinct from other assets of the insurer and every insurer shall submit to the Authority the necessary details of such funds as may be required by the Authority from time to time and such funds shall not be applied directly or indirectly, save as expressly permitted under this Act or regulations made thereunder.]

(3) The life insurance fund shall be as absolutely the security of the life policy-holders as though it belonged to an insurer carrying on no other business than life insurance business and shall not be liable for any contracts of the insurer for which it would not have been liable had the business of the insurer been only that of life insurance and shall not be applied directly or indirectly ¹⁷*** for any purposes ¹⁸[other than those of the life insurance business of the insurer].

Section 10, The Insurance Act, 1938 (Act 4 of 1938).