IRDA to review insurance investment in stocks

IRDA to review insurance investment in stocks
ENS ECONOMIC BUREAU

NEW DELHI, MAR 28: Allaying all fears, the Insurance Regulatory and Development Authority (IRDA) today indicated that it will review the functions of all insurance companies, including their investment pattern in equities, and ensure that there is no asset liability mismatch.

‘‘We will review the functions of insurance companies,’’ IRDA chairman N Rangachary told reporters on the sidelines of a seminar here. Although it was ‘too early’ for the regulator to review the investment pattern, he said the companies have to comply with the prudential norms laid down by the IRDA.

‘‘The problem of mismatch of assets and liabilities have been taken care of through a system of directed investment and the companies cannot invest the funds outside India,’’ he said assuring that Indian insurance companies would be prevented from insolvency problems as faced by some companies during the East-Asian crisis.

He said IRDA has asked insurance companies to constitute an ‘Investment Committee’ comprising chief executive officer, chief financial officer, two directors and an appointed actuary (only for Life Insurance companies), for periodic review of investment pattern and informing the IRDA. Currently, Insurance companies are allowed only 25 per cent in equities and other permitted securities and a major 50 per cent in central and state government papers.

Rangachary said the appointed actuary in the Insurance company had been given powers to look into various provisions to be made by the company, pricing of policies, and “blow the whistle” by informing the IRDA if the functions were not found satisfactory.

Rangachary said the actuary appointed by the Insurance companies would have to be approved by IRDA. ‘‘We now have a say in quality of management and products,and the solvency margins,’’ he said. According to the IRDA guidelines, companies are required to keep a solvency margin of 150 per cent.