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Government securities and other approved securities held to comply with Section 27 investments must be held by the insurer:
A{'text': 'Free of any encumbrance, charge, hypothecation or lien', 'letter': 'A'}
B{'text': 'With any encumbrance allowed', 'letter': 'B'}
C{'text': 'Only with RBI as custodian', 'letter': 'C'}
D{'text': 'Pledged with the Central Government', 'letter': 'D'}
Answer & Solution
Correct answer: A. {'text': 'Free of any encumbrance, charge, hypothecation or lien', 'letter': 'A'}
1. Section 27(6) restricts how the prescribed investments may be held.
2. Any pledge or encumbrance would defeat the policyholder-protection purpose.
3. The securities ... shall be held by the insurer free of any encumbrance, charge, hypothecation or lien.
_Source: Insurance Act 1938 (incorporating amendments till 2021), noc.irdai.gov.in — "The Government securities and other approved securities in which assets are ... to be invested and kept invested shall be held by the insurer free of any encumbrance, charge, hypothecation or lien."_