LIC, pvt insurers to be governed at par on equity cap: IRDA

The IRDA (Insurance Regulatory and Development Authority) has made it clear that the Life Insurance Corporation of India (LIC) will be governed at par with any other insurers when it comes to the investment limit on equities, according to media sources.

In a notification, IRDA said, Insurance companies will now be allowed to increase their exposure in equity in a given company from the present level of 10% to a higher level of 12% and 15% depending upon the size of the Controlled Fund of any given insurer. A controlled fund refers to traditional insurance policies and policyholder funds.

This is commensurate and appropriate given the size of funds under consideration without adversely affecting the prudential management of investments, the IRDA notification added.

IRDA chairman J Harinarayan said that the increase in the equity cap for insurers from 10% to 12% and 15% is applicable for all insurers. LIC will also be required to adhere to this cap, as they are under our jurisdiction, the reports aded.

In November 2012, former financial services secretary DK Mittal had said LIC could invest up to 30% in a company. The finance ministry had raised the investment cap LIC to 30% after pointing out that the LIC Act, 1959, supersedes the Insurance Act. Started over five decades ago, LIC is in the business of insuring lives and, for most, generating safe returns. LIC has been proposing to hike its investment limit up to 30% as it has already exhausted the limit for various blue-chip stocks. The state-owned insurer had said that the 10% cap restricted the insurer’s participation in the equity market.

According to the LIC Act, LIC could invest up to 30% of its total funds in a single entity. The IRDA notification also cleared other key regulations, including those in the area of health regulations, a standard proposal form for sale of life insurance products and a draft to strengthen the Indian Institute of Insurance Surveyors and Loss Assessors.

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