`The new higher limit will allow insurers to invest larger amount of money in safe instruments of other financial sector companies including insurance companies and improve their returns,” said industry sources
Hyderabad:
In a bid to boost investment income for insurers, the insurance regulator Irdai on Thursday has decided to raise their permissible limit of investments in financial and insurance companies from 25 per cent to 30 per cent of their total investible assets .
The existing Irdai norms allow insurers to invest a maximum of 25 per cent of their total investible assets in other BFSI companies. The insurers are also allowed to invest 10 per cent in individual companies as an investor .
Further, according to the existing guidelines, insurers can only to invest in AAA and AA rated financial instruments of other financial companies which are not available in plenty.
“The new limit will allow insurers to invest larger amount of money in safe instruments of other financial sector companies including insurance companies and improve their returns,” said industry sources.
Besides, not many avenues are there for safe investments in the economy and now insurers, with much larger investible funds, can at least can increase their investments in the company where they have already invested,” explained the sources.
Life Insurance industry had been seeking an increase in the current 25% sectoral limit on exposure to the BFSI Sector, said Sampath Reddy, chief investment officer, Bajaj Allianz Life.
The increase in this limit to 30 per cent will provide the much needed leeway for the Insurance companies to increase their exposure to the sector and bring it closer to the broader market levels, he said.
Additionally, they would also be in position to hold a much wider basket of diverse stocks within the sector and participate in the promising Indian growth story through the same, he said.
Weightage of financial & insurance companies in broader Indian market indices has consistently gone up over the last few years,