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The Insurance Regulatory and Development Authority of India (IRDAI), on Tuesday, stressed that insurance companies must invest in higher-rated paper.
“Lower-rated companies may offer better returns but it may not be safe. They have to follow regulations,” said Subhash Chandra Khuntia, Chairman, IRDAI, on the sidelines of the CII Insurance and Pensions Conference.
His comments come at a time when state-owned Life Insurance Corporation of India (LIC) is the largest shareholder in ailing Infrastructure Leasing and Financial Services with a 23.5 per cent stake.
The firm’s rating has been downgraded to junk grade by ICRA, and is now hoping for a ₹3,000-crore loan from LIC and State Bank of India. Its board is likely to meet later this month to discuss the issue.
Speaking to reporters, Khuntia said that when there is a downgrade in the ratings of a company, an insurer should not invest in it. “LIC will have to take a call on what to do with it,” he said.
Meanwhile, he also said that insurance companies have sought the IRDAI’s permission to raise 25 per cent of their net worth via Tier II bonds. “It is too early to comment on this. They have just made the proposal,” he said.
He also said it is too early to comment on any proposal to change the listing norms of insurance companies.
Meanwhile, addressing the conference, Khuntia urged insurers to offer simple and standardised insurance products.
“Specific points can be added as per customers’ requirements, but a standardised product is the need of the hour,” he said. More standardised products on the lines of the motor third-party insurance can be developed as they would be simple to understand for customers and prevent mis-selling of products.
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