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Wednesday, December 31, 2008

Irda eases investment norms

Insurance companies can invest more in infrastructure, housing sectors

With a view to enhancing the flow of insurance funds to meet the present needs of infrastructure financing and keeping policyholders' interest in view, The Insurance Regulatory and Development Authority (Irda) has decided to partially amend the requirements in so far as it relates to exposure limits applicable to investments in Public limited companies engaged in 'Infrastructure Sector' and 'Housing Sector'. The limits would apply as under with immediate effect.

The exposure of any insurer to an infrastructure company may be increased to not more than 20% as against the present ceiling of 10% as referred in Reg. 5. The limit would be combined for both Debt and Equity taken together without sub ceilings.

This exposure of 20% can be further increased by an additional 5% (i.e. the aggregate exposure to a single investee company being upto 25%) with the prior approval of Board of Directors. Such additional investments shall however be restricted to debt instruments.

Infrastructure activity shall be as defined under Irda (Registration) Regulation, 2000 as amended from time to time.

In the case of Debt investments, the duration of investment shall be not less than 10 years and they should have a minimum rating of AA by a credit rating agency registered under Sebi (Credit Rating Agencies) Regulations, 1999.

In the case of Equity investment, dividend of not less than 4% including bonus should have been declared in at least for the 5 preceding years. However in the case of primary issuance of a wholly owned subsidiary of a corporate/PSU, the track record as mentioned above would be applied to the holding company.

source: Capital Market

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