Insurers may invest up to 5% of surplus funds in private ltd firms: Irdai

Under the proposed norms, insurers may invest in private limited companies with a minimum net worth of Rs 25 crore and a reported net profit in at least two of the preceding three financial years.

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“Insurers may invest not more than 5 per cent of shareholders’ funds available beyond the solvency margin in private limited companies with a minimum net worth of Rs 25 crore and reported net profit for at least two years out of the three preceding years,” Irdai said in a consultation paper. Insurers are currently required to maintain a solvency ratio of at least 150 per cent.

The regulator, however, barred investments in private limited companies belonging to an insurer’s promoter group. It also proposed that insurers should not invest more than 5 per cent of their investment assets in any company or body corporate owned or controlled by the promoter. Further, aggregate investments across all promoter-group companies should not exceed 5 per cent of the insurer’s investment assets.

To facilitate liquidity management, Irdai has also proposed permitting life insurers to undertake repo transactions and securities lending in government securities.

In a separate consultation paper, the regulator proposed changes to the registration framework for insurance intermediaries following the enactment of the SBSR Act, which removed the requirement for periodic licence renewals.

Irdai said that where a certificate of registration has been cancelled, surrendered, or an application rejected, a fresh application can be made only after one year from the effective date of such cancellation, surrender or rejection.

The regulator has also proposed changes to the registration and operations of foreign reinsurance branches (FRBs), including reducing the minimum net-owned funds requirement for the parent reinsurer to Rs 1,000 crore from Rs 5,000 crore.

Separately, Irdai proposed a framework for imposing penalties under the amended insurance law, stating that penalties would be proportionate to the nature and gravity of the contravention or default.

“The proposed regulations provide that orders imposing penalties shall be reasoned and shall record the findings of the Authority along with the relevant contraventions or defaults established and the penalties imposed,” the regulator said.