The Insurance Regulatory and Development Authority (IRDA), on Wednesday, proposed to allow insurers to hedge their interest rate risks with long-term financial derivative instruments, including forward rate agreements and interest rate swaps.
The insurers, as per the draft guidelines on ‘fixed income derivates’ issued by the insurance regulator, will also be allowed to hedge their long-term interest rate risks through exchange traded interest rate futures.
As per the existing guidelines, the insurance companies can hedge their risks through derivative instruments with a maturity period of up to one year only.
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The regulator has sought comments of stakeholders on the draft within 30 days.
The need to review the existing guidelines, IRDA said, has been felt in view of the change in investment environment, product structures, and change in guidelines by other regulators such as the RBI.