The Telegraph
Saturday , February 9 , 2013
Since 1st March, 1999
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Equity exposure limit of insurers up to 15%

New Delhi, Feb. 8: Insurance firms can now hold up to 15 per cent stake in any company, up from 10 per cent at present, as the sector regulator IRDA today permitted raising of the investment limit.

The decision comes on the back of the finance ministry pitching to raise the equity investment limit of the Life Insurance Corporation of India (LIC) to up to 30 per cent.

“Insurance companies will now be allowed to increase their exposure to equity in a given company from the present level of 10 per cent to a higher level of 12 per cent and 15 per cent, depending upon the size of the controlled fund of any given insurer,” the Insurance Regulatory and Development Authority (IRDA) said in a statement.

The move is in line with the growing size of funds managed by insurers and will not have any adverse effect on their financial health, it added.

“The authority believes that this is commensurate and appropriate given the size of funds under consideration without adversely affecting the prudential management of investments,” the IRDA said.

The move comes about four years after the regulator amended investment norms to prohibit an insurer from holding more than 10 per cent in a company.

Differences had emerged between the finance ministry and the IRDA over raising the investment limit of the LIC.

The ministry had proposed to raise the cap to 30 per cent for the life insurance behemoth, while the regulator had its reservation.

The IRDA had said that the LIC was on a par with all other private insurers and it would be imprudent to raise the cap specifically for the LIC to 30 per cent.

The board of the IRDA also approved the health insurance regulations that will enable the development of a robust, consumer friendly insurance system.

Further, the board has referred the matter to the insurance advisory committee to have more clarity on bancassurance regulations.

The board also approved a standard proposal form to capture full details of a policyholder in accordance with the KYC (know your customer) norms for the sale of life insurance products, which would be mandatory after six months.

This, the IRDA said, would improve “the service levels to prospective policyholders and further minimise the chances of mis-sale”.