Life insurers can't participate in repo transactions: Irda

Detailed checks on exposure in other securities? deals, transactions accounting methodology to follow central bank rules

The Insurance Regulatory and Development Authority (Irda) on Tuesdayf said life insurance companies were not permitted to participate in repo transactions. In the case of reverse repo (lending) transactions in government securities and corporate debt securities, the regulator said the exposure should not exceed 10 per cent of all funds taken together.

At a segregated fund level, too, Irda said the exposure should not exceed 10 per cent of the fund size. For non-life insurers, the regulator said exposure to reverse repo and repo transactions in government securities and corporate debt securities should not exceed 10 per cent of the company’s investment assets.

“The tenor of repo transactions shall not exceed a period of six months," said Irda, in a circular. And, that all companies would have to take prior approval of its investment committee before entering into a repo transaction. The underlying debt security would have to be listed, with a minimum rating of AA or equivalent, said the circular. Further, it said reverse repo and repo transactions in corporate debt securities would not be permitted between an insurer and its promoter group entities.

NEW NORMS

• At segregated fund level, exposure should not exceed 10% of fund size
• For non-life insurers, exposure to reverse repo and repo transactions in G-Secs and corporate debt securities should not exceed 10% of investment assets
• Tenor of repo transactions not to exceed 6 months
• Require prior approval of investment committee before repo transactions
• Underlying debt security to be listed, with minimum rating of AA or equivalent
• Reverse repo and repo transactions in corporate debt securities not permitted between insurer and promoter group entities

And, said Irda, on accounting methodology and reporting of trades for reverse repo and repo transactions, companies would have to follow the Reserve Bank of India’s directions of January 2010.