India’s insurance regulator has decided to double the investment limit
in liquid mutual funds for general insurers. At present, general
insurance companies are allowed to invest 1.5% of assets into liquid
mutual funds under the approved investment category where the size of
the fund is above Rs 2,000 crore. Now, they will be allowed to invest an
additional 1.5% or Rs 3,500 crore. "It is a temporary relaxation," a
senior official at the Insurance Regulatory and Development Authority
(Irda) said, adding that the decision followed repeated representations
from the mutual fund association.
"Eventually, it supports the borrowing programme of the government with the enhanced liquidity," said Deven Choksey, managing director at Choksey Shares and Securities. "From the equity market perspective, it remains neutral." Non-life industry manages assets worth Rs 2.5 lakh crore. The regulator has decided to allow life insurance companies to invest in fixed deposit schemes of promoter group banks within the group exposure limit of 5%. General Insurers can double their exposure to liquid mutual funds: IRDA "Considering the representations from the industry and the life council, it is decided to permit FDs, as stated in the regulations, in promoter group scheduled banks within the 5% limit prescribed for promoter group," Irda said. As per the norms, insurers can invest not more than 3% of the controlled fund in one bank.
"This will help a company like SBI Life get flexibility in investment and improve return on its portfolio," said Abhijit Gulanikar, chief investment officer at SBI Life. Exposure to promoter group companies is capped at 5% of investment assets of the insurance company. Irda has brought down the limit gradually from 12.5% to 5% in February 2013. According to estimates, private life insurance industry can invest Rs 15,000 crore in FDs of promoter group companies. State-owned Life Insurance Corporation of India, which manages assets worth Rs 13 lakh crore, will see no change in investment portfolio.
In April, the regulator had banned companies from investing in fixed deposits and credit default swaps of the promoter group company. In addition, insurers can increase investment in information technology and industrial sector to up to 20% from the existing 15% after the approval of the board. "We note that the industrial weightage on the benchmark indices is dynamic and presently IT industry contributes more than 15% on the benchmark indices," Irda said. "As the weightage keeps on changing from time to time, it is decided to give general permission to have exposure of further 5% in one industrial sector."
Source: ET
"Eventually, it supports the borrowing programme of the government with the enhanced liquidity," said Deven Choksey, managing director at Choksey Shares and Securities. "From the equity market perspective, it remains neutral." Non-life industry manages assets worth Rs 2.5 lakh crore. The regulator has decided to allow life insurance companies to invest in fixed deposit schemes of promoter group banks within the group exposure limit of 5%. General Insurers can double their exposure to liquid mutual funds: IRDA "Considering the representations from the industry and the life council, it is decided to permit FDs, as stated in the regulations, in promoter group scheduled banks within the 5% limit prescribed for promoter group," Irda said. As per the norms, insurers can invest not more than 3% of the controlled fund in one bank.
"This will help a company like SBI Life get flexibility in investment and improve return on its portfolio," said Abhijit Gulanikar, chief investment officer at SBI Life. Exposure to promoter group companies is capped at 5% of investment assets of the insurance company. Irda has brought down the limit gradually from 12.5% to 5% in February 2013. According to estimates, private life insurance industry can invest Rs 15,000 crore in FDs of promoter group companies. State-owned Life Insurance Corporation of India, which manages assets worth Rs 13 lakh crore, will see no change in investment portfolio.
In April, the regulator had banned companies from investing in fixed deposits and credit default swaps of the promoter group company. In addition, insurers can increase investment in information technology and industrial sector to up to 20% from the existing 15% after the approval of the board. "We note that the industrial weightage on the benchmark indices is dynamic and presently IT industry contributes more than 15% on the benchmark indices," Irda said. "As the weightage keeps on changing from time to time, it is decided to give general permission to have exposure of further 5% in one industrial sector."
Source: ET
