Debt investment norms for LIC may be relaxed

The Insurance Regulatory and Development Authority (Irda) might relax the debt investment norms for Life Insurance Corporation of India (LIC).

The regulator is willing to allow the state-run life insurer, the country’s largest, to invest up to 20 per cent in debt in a particular company. Currently, LIC’s debt exposure in a single company is capped at 10 per cent. However, this additional exposure will be allowed only for the exchange-traded debt issues.

“We are considering LIC’s request for additional exposure in debt. If the bonds are issued by the company is exchange traded, then LIC’s exposure can go up to 20 per cent,” Irda Chairman J Hari Narayan said.
 

IN FOCUS

Irda ready to allow LIC 20% debt investment in a particular company

Equity exposure limit remains at 10%, investments projected to be around Rs 35,000 cr

LIC’s total debt and equities investment in 2010-11 was Rs 193,000 cr

In 2011-12, LIC’s total investment may stand at Rs 180,000 cr

Irda says private insurers should look forward and provide pension products

He added that the equity exposure limit of the insurance behemoth would be kept unchanged at 10 per cent.

The relaxation will help the largest institutional investor in the country to increase its debt exposure, but LIC’s main concern over the years has been the equity exposure limits in a single company.

Last month, LIC had sought a relaxation in the exposure limit in a single company from the insurance regulator.

LIC’s total investment in debt and equities during 2011-12 is expected to stand at Rs 1,80,000 crore, down from Rs 1,93,000 crore invested last year. LIC is also expected scale down its equity investments to Rs 35,000-40,000 crore in 2011-12 from Rs 60,000 crore projected at the beginning of the year, due to slower growth in premium income.

Speaking at the Global Insurance Summit, organised by Assocham, Hari Narayan also said private insurers should be looking to provide pension products along with the annuity plans as the draft pension guidelines mandated.

“The annuity business is largely concentrated with LIC. This large concentration of risk is not advisable and hence the private life insurance players should look to provide annuity products along with the accumulative pension plans,” he said.

The regulator also mentioned that the minimum sum assured provided must be linked with the total premiums collected as mandated by the direct taxes code (DTC).

“All the policies where the minimum sum assured benefit is lower than as prescribed by DTC (which is five times of the total premiums) then those policies would not come under the income-tax limit, hence it should be brought in line,” he said. So, the minimum sum assured limit should be there for every policy, he added.