IRDA opposes move to raise investment cap for insurers
11 Dec 2012
The Insurance Regulatory & Development Authority (IRDA) has opposed the finance ministry's plans to hike the investment ceiling for insurers, including state-run Life Insurance Corporation (LIC) of India, to 30 per cent, calling it 'imprudent'.
While the Insurance Act limits investments by insurance firms into any company at 10 per cent of the fund or 10 per cent of the stake, whichever is lower, the finance ministry has recently circulated a draft that seeks to increase the investment limit for LIC to 30 per cent of the paid-up capital in a company.
The insurance regulator called for a more conservative approach and ruled out hiking the cap for private sector insurance firms as well.
Pegging the investment limit at 30 per cent would lead to insurance companies behaving like venture capital undertakings, which would not be warranted, according to IRDA chairman J Harinarayan.
''The question is whether insurance investment must be as aggressive as venture capital companies. I think not. Insurance companies must be conservative in their approach,'' Harinarayan said on the sidelines of a FICCI Health Insurance conference in New Delhi on Monday.
''The level suggested in the draft is very high. These are the levels at which venture capital companies invest as per SEBI norms'', he said, adding that raising investment limit to 30 per cent would also raise issues on SEBI takeover code.
