MUMBAI: Private sector insurers have urged the Insurance Regulatory and Development Authority of India (IRDAI) to relax proposed investment norms for unlisted companies by linking exposure limits to shareholders’ funds instead of the surplus available after meeting solvency, said people with knowledge of the matter.
Industry says such a move would unlock billions of rupees for investment in privately held businesses, according to the people cited.
Under draft norms issued last month, Irdai proposed allowing insurers to invest up to 5% of shareholders’ funds available over and above the required solvency margin in eligible private limited companies with a minimum net worth of ₹25 crore and a track record of profitability. The regulator had sought industry comments by July 10.
“Insurers have asked Irdai to calculate the proposed 5% investment limit on total shareholders’ funds rather than only the surplus available after meeting solvency requirements, as they say it would expand insurers’ capacity to invest in unlisted companies while remaining within overall prudential limits,” said one of the persons.
Based on current balance sheets, the proposed framework could expand the sector’s investment capacity in private companies to nearly ₹10,000 crore from less than ₹1,500 crore under the existing rules, industry estimates show.
Industry executives said the change would enable insurers, which manage long-term liabilities, to play a bigger role in financing private businesses across infrastructure, manufacturing, financial services and other long-duration sectors that require patient capital.
“The current framework is restrictive,” another person said, adding that the proposed change would increase investment opportunities without materially increasing risk.
The proposal is part of the proposed changes in insurers’ investment regulations aimed at expanding the range of permissible investments and improving portfolio management. Alongside higher exposure limits for private companies, Irdai has proposed allowing insurers to undertake repo transactions to better manage short-term liquidity and participate in government securities lending, giving them greater flexibility in managing investment portfolios and generating additional returns.
Source: The Economic Times
