Skip to main content

IRDA Tightens Equity Investment Norms for Insurers

By
The insurance regulator has tightened equity investment norms by prescribing a dividend track record of 10% for the last two years instead of the earlier 4% in the last eight out of the nine years.
The Insurance Regulatory and Development Authority (IRDA) has said that insurance companies can invest in equity shares of any listed company where at least 10% dividend has been paid for at least two consecutive years under the approved investment category .
Under the unit-linked insurance plans, which are a mix of investment and protection, companies can invest 75% in approved securities and 25% in other than approved securities. Approved securities are those stocks that have dividend paying record and are liquid.
As per the liquidity criteria, in a month 50,000 shares, or a value of Rs.5 lakh crore, should be traded.Traditional funds invest primarily in government securities -50% -both state and central, 15% in infrastructure, and the remaining 35% in corporate bonds, equities and other than approved securities.
The regulator wants insurance companies to stay away from investing in companies which have not paid dividend and are financially weak.
Out of the BSE 200 companies, 30 companies have paid less than 10% dividend in the last two years. “We will have to move our investments from approved to other than approved and slowly pare some of the investments,“ said an investment officer of a large life insurance company , who did not wish to be identified. “We will take up the matter to the board.“ Also, insurance companies are not allowed to charge fund management fees on investment in liquid funds, exchange traded funds and fixed deposits of less than 91 days. At present, companies charge FMC of 1.35% on the asset under management.
The regulator has asked companies to close the fund within six months, if the size of the fund is less than Rs.5 crore. They will have to move policyholders to another fund within this period.
“Where any segregated fund invest in either mutual fund, exchange traded fund or bank fixed deposit, for a period less than 91 days at the time of placing the investment, the value of funds invested therein, shall be reduced for computing the fund management charges,“ said Irda in the regulations.
The regulator has said that every insurer shall have a separate fund manager for debt and equity up to a fund size of Rs.10,000 crore for both shareholder and policyholder funds taken together. For a fund size of over Rs.10,000 crore, every fund will need to have separate fund manager for life, pension, annuity and group fund and unit linked.
Business Standard New Delhi,24th August 2016

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Healthy balance sheets augur well for economy: RBI Governor Sanjay Malhotra

By
  Large tariffs by the United States administration and elevated geopolitical risk have increased near-term global financial stability risks, and along with weather events pose downside risks to domestic growth, Reserve Bank of India(RBI) Governor Sanjay Malhotra said in the foreword to the Financial Stability Report released today.Noting that domestic growth momentum is buoyed by strong domestic drivers, sound macroeconomic fundamentals and prudent policies, Malhotra said: “External spillovers and weather-related events could pose downside risks to growth.”On the other hand, he said the outlook for inflation is benign, and there is greater confidence in the durable alignment of inflation with the Reserve Bank’s target.Commenting that the structural shifts reshaping the global economy are making policy intervention challenging, the Governor emphasised the need for central banks and financial sector regulators to remain vigilant, prudent and agile in safeguarding their economies and...
Post a Comment
Read more