The Insurance Regulatory and Development Authority is considering restricting investments by life and non-life insurance companies in their promoter companies to 5 per cent from the current limit of 12.5 per cent.
Current investment regulations stipulate that 12.5 per cent of the corpus of unit-linked insurance plans can be invested in the insurer’s promoter company.
However, the regulator is of the view that for investment prudence, insurance companies should not invest more than 5 per cent in promoter companies.
Further, the headroom for investments in the ‘AA’ rated corporate bonds is proposed to be created by clubbing the investment limits in government securities along with ‘AAA’ rated corporate bonds. The composite investment limit for ‘AAA’ rated bonds and government securities could be set at 75 per cent.
For general insurers, the regulator is considering lowering the requirement of 75 per cent of investments in ‘AAA’ rated bonds and government securities to 65 per cent.
“The differentiation is important, as life and general insurers have different risk profiles. The new norms will help general insurers to invest higher amounts in some higher yielding instruments and help insurance companies improve investment performance,” said a CEO of a general insurance company.
After four years, the insurance regulator is planning a comprehensive revamp of its investment regulations for insurers. The regulations will be tabled in the IRDA board meeting to be held in February.
The total assets under management of life insurance companies and general insurance companies were Rs 28-lakh crore and Rs 99,268 crore, respectively, as of March 31, 2012.