The Insurance Regulatory and Development Authority of India (IRDAI) said that insurance companies should not only rely on external ratings but should use their own judgment while investing.
Interacting with the media on the sidelines of the Global Conference of Actuaries organised by Institute of Actuaries of Indi, IRDAI chairman Subhash Chandra Khuntia said, “We have told insurance companies that they should not only be looking at the ratings. They also need to apply their own judgement.” The regulator made the comments while responding to a question regarding insurance companies’ exposure to troubled infrastructure conglomerate IL&FS in which Life Insurance Corporation, the biggest shareholder, also has an exposure.
“Each insurer has a separate exposure. For any investment, our requirement is that it should be done in highly-rated investments. Insurers will have to take necessary actions for those investments,” he said. IL&FS was AAA rated but after the company started defaulting on debt instruments, its rating was cut to junk.
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To a question on LIC’s stake in IDBI Bank, he said LIC was yet to give a roadmap on the timeline to bring down its stake to 15%, from 51%, as per regulatory norms. LIC had recently acquired stake in the bank from the Centre.
He also highlighted the importance of actuaries and technology while delivering his speech.
“With the emergence of technologies like big analytics, the role of actuaries will expand manifold. The role of actuaries are more important in innovating insurance product which are transparent and understandable to a common man,” he said.
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The IRDAI has taken big digital strides in developing a ‘regulatory sandbox’, a state-of-the-art concept that aims to promote safe digital growth in the insurance industry.