Insurers should be allowed to invest in new asset classes: LIC Chairman

Mohanty called for a framework facilitating regular interaction among regulators

Asserting that investment regulations for insurers are highly regulated, Chairman of Life Insurance Corporation of India (LIC) Siddhartha Mohanty on Thursday said that insurance companies should be permitted to invest in new asset classes like sovereign gold bonds and equity derivatives to enhance liquidity.

Speaking at the 10th SBI Banking and Economic Conclave, he said insurers should have access to Central Repository of Information on Large Credits (CRILC) data. He said despite being a major participant in the debt market, LIC has no access to CRILC data, which hinders its ability to conduct comprehensive assessments and appraisals.

“For insurance companies, so far as investment is concerned, it is highly regulated. So, new asset class should also be allowed, like your sovereign gold bond, equity derivative, all these things should also be allowed to insurance companies so that there will be more liquidity,” he said.

“I am the largest participant in the debt market (but) I have no access (to CRILC). My assessment and appraisals (are) on the basis of whatever public domain reports are there, financials, I do it on that. So, I would be happy if we are given access to CRILC,” he said.

Mohanty also said that there is a need for more long-term securities to align with insurance companies’ asset-liability management strategy, given the inherently long-term nature of their liabilities. The central government introduced the 50-year tenor security in its borrowing calendar for the second half of the current financial year, fulfilling a long-standing demand by life insurance companies, particularly the LIC. The government plans to raise a total of ~30,000 crore through these securities.

“Long-term paper, they (the RBI) have helped us. Earlier, we got some 40-year, 50-year paper but more such papers will be required because our asset-liability management, our liabilities are long-term,” he said.

Mohanty said that it is crucial to establish a comprehensive framework that facilitates regular interaction among all regulators. This framework should actively involve market participants, allowing them to engage in direct discussions and present their cases. Such a proactive approach is instrumental in resolving numerous operational challenges.

He said that while certain issues may remain at higher echelons — such as the policy, government, and legislative levels — there exists significant potential for the resolution of many smaller issues through a collaborative and interactive regulatory platform.