The move is in line with the growing size of funds managed by insurance firms
Insurance companies can now hold up to 15 per cent stake in any company, up from 10 per cent at present, as the Insurance Regulatory and Development Authority (IRDA), on Friday, permitted raising of the investment limit.
The decision comes on the back of the Finance Ministry pitching for raising the equity investment limit for insurance behemoth LIC to up to 30 per cent.
“Insurance companies will now be allowed to increase their exposure in equity in a given company from the present level of 10 per cent to a higher level of 12 per cent and 15 per cent depending upon the size of the controlled fund of any given insurer,” the IRDA said in a statement. It said that the move is in line with the growing size of funds managed by the insurance companies and would not have any adverse effect on the financial health of the insurer. “The Authority believes that this is commensurate and appropriate given the size of funds under consideration without adversely affecting the prudential management of investments,” it said.
The move comes about four years after the IRDA amended investment norms to prohibit an insurer from holding more than a 10 per cent stake in a company.
Differences had emerged between Finance Ministry and IRDA over the issue of raising investment limit for LIC. The Ministry proposed to raise the limit up to 25 per cent in case of LIC, while the regulator had reservations.
The IRDA said LIC was on a par with all other private insurers and it would be imprudent to raise the cap specifically for LIC to 30 per cent. The board of IRDA also approved the health insurance regulations that would enable a more consumer-friendly system. Further, the board has referred the matter to insurance advisory committee to have more clarity on bancassurance regulation.
The board also approved a standard proposal form to capture full details of a policyholder in accordance with the KYC norms for sale of life insurance products which would be mandatory after six months.