Insurers may get to invest in IIFCL's new bonds

Insurers may be allowed to invest in the proposed bonds of the India Infrastructure Finance Company Ltd (IIFCL) for refinancing greenfield infrastructure projects.

The Insurance Regulatory and Development Authority (Irda) is considering the bonds to be floated by IIFCL, according to a senior official. “We are looking at the recommendations of the Deepak Parekh committee report. At present, there are restrictions on insurance funding in infrastructure bonds. We would like that funds from the insurance sector to flow in the infrastructure sector,” said R K Nair, member (F&I), Irda. He was speaking to reporters on the sidelines of a seminar, organised by the Indian Chamber of Commerce, here yesterday.

The Deepak Parekh committee on infrastructure funding had urged regulators — the Reserve Bank of India (RBI), the Securities and Exchange Board of India (Sebi), the Irda, and the Pension Fund Regulatory and Development Authority (PFRDA) — to change existing laws to enable insurance and pension funds flow into the infrastructure sector. It had also endorsed the idea of the Planning Commission to form a Rs 50,000-crore debt fund to finance the infrastructure sector.

At present, 50 per cent of insurance investments are made in government or other approved securities. As most infrastructure special purpose vehicles (SPVs) are unlisted, insurance companies and pension funds can’t invest in them.

The infrastructure sector would require about $500 billion by 2012, according to Finance Minister Pranab Mukherjee. A major part of the funding is expected to come from the private sector. The finance minister also favours a robust rupee-dominated long-term debt market to fund the infrastructure sector.

Nair also said Irda was working on an “early warning system” for non-life insurers so that they had adequate capital and solvency.

The insurance regulator also plans to come out with quarterly disclosure norms for insurance companies, and consultancy company Deloitte is helping it in preparing the format, according to Nair. Now, insurers make some disclosures on quarterly and others on half-yearly and yearly basis.

Nair said Irda was also working on the mergers and acquisitions (M&A) and initial public offering (IPO) guidelines for insurance companies.