Irda seeks details from insurers

The Insurance Regulatory and Development Authority (Irda) has asked insurance companies to disclose all investments made during the last three months — September, October and November — prompting insurers to make additional disclosures.

“In the light of changing macro-economic climate and risk parameters, there is an urgent need to be cautious with reference to investment of funds, in general, and policyholders’ funds, in particular,” Irda said in a recent circular.

Sources at the regulatory body said going forward, companies may be mandated to disclose the investment to policyholders too. A system of quarterly disclosure is being contemplated, an official said.

The regulator has asked insurers to submit the information by December 15 or face penal action.

“Irda has recently come up with investment guidelines, which will be effective from January 1, 2009. So, the regulator is trying to get information on the investment pattern of insurers,” said an executive of a private insurance company.

A bulk of the investment relates to life insurance companies. Irda guidelines permit these companies to invest 50 per cent of their corpus in government-approved securities, 15 per cent in infrastructure and the remaining 35 per cent in equity and other instruments.

The regulator is keen to ensure that insurers are complying with the prescribed norms and are not parking funds in risky papers. Irda has clearly mentioned that no investment should be made in an asset or instrument, which is capable of being rated according to the market practice, but has not been rated.

Moreover, Irda has said assets or instruments under consideration for investment must not be less than grade AA according to their current rating. If investments of this grade are not available to meet the investment requirements of insurers, the investment committee may then approve instruments carrying the current rating of not less than +A, which is considered as the minimum rating.

It has also mentioned that any investment in the short-, medium-, long-term loans or deposits with private limited companies will not be treated as approved investments.

The Bombay Stock Exchange (BSE) Sensex has fallen from its peak of over 21,000 in January to the 9,000-level in November. Foreign institutional investors (FIIs) have been selling in the equity market.