Insurers can't invest in risky bonds: Irdai

Says it has not allowed insurers to invest in additional Tier-1 capital bonds

The Insurance Regulatory and Development Authority of India (Irdai) has no plans to allow insurers to invest in additional Tier-1 capital bonds given the risk associated with these instruments, said V R Iyer, member, finance and investment, at Irdai.

“They are risky and hence we have not allowed insurers to invest in them. We are still in talks and could look into it if some sort of a guarantee is given,” said Iyer on the sidelines of the India Risk Forum organised by Dun & Bradstreet India here on Friday.

These bonds have a provision called ‘loss absorbency’ clause, which means if there is some stress or loss, the particular bank can write off such investments or convert them into equity.

Irdai is yet to take a final view on unit-linked insurance plan (Ulip) funds' investment in government securities, although some relaxation might be given. In its draft norms on investments, Irdai said not less than 25 per cent of Ulip funds could be invested in Central government securities. Iyer, however, clarified that some tweaking in the percentage could be done, but this requirement would not be doneaway with.