Life insurers can't participate in repo transactions: Irda

Says exposure to reverse repo transactions should not exceed 10% of the fund size

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

At segregated fund level too, Irda said that exposure should not exceed 10% of the fund size. For non-life insurers, the insurance regulator said that the exposure to reverse repo and repo transactions in government securities and corporate debt securities should not exceed 10% of investment assets of the insurer.

"The tenure of repo transactions shall not exceed a period of six months," said Irda, in a circular to insurers. It further said that all companies would have to take prior approval of investment committee before entering into repo transactions.

The underlying debt security would have to be listed and have a minimum rating of AA or equivalent, according to the Irda circular. It further said that reverse repo and repo transactions in corporate debt securities would not be permitted between insurer and its promoter group entities.

Irda also said that in terms of matters like accounting methodology and reporting of trades for reverse repo and repo transactions, companies would have to follow the January 2010 directions of Reserve Bank of India.