Mumbai: Insurance companies will now have more leeway to invest in sectors such as IT and pharma. The Insurance Regulatory and Development Authority has increased the sector specific exposure limit for investments by insurers from 15 per cent to 20 per cent of their total investment.
Hitherto, insurers, both life and non-life, were permitted to take an exposure in a specific sector up to 15 per cent of their investments (which includes debt and equity), with the exception of banking and financial services where the limit is 25 per cent and infrastructure where there is no exposure limit.
According to IRDA investment norms, at any point of time, insurers are permitted to have excess weightage beyond 15 per cent in only one industrial sector (except BFSI and infrastructure sectors).In a circular issued on Wednesday, the regulator observed that the industrial weightage vis-a-vis the benchmark indices is dynamic and at present the IT industry contributes more than 15 per cent to the benchmark indices. As the weightage keeps on changing from time to time, the regulator said it has decided to give general permission to have a further exposure of 5 per cent in one industrial sector (not applicable to BFSI).
“This was a long pending request from the industry. We will be now able to allocate more funds to other sectors such as IT and pharma, which have been performing very well,” said the chief investment officer of a private life insurer.
For raising the investments in a specific sector, insurers are required to take prior permission from their board.
IRDA also relaxed norms for fixed deposit investments in the promoter group of insurance companies.
“Considering the representations from the industry and the Life Insurance Council, we have decided to permit fixed deposits, as stated in the regulations, in promoter group scheduled banks within the 5 per cent limit prescribed for Promoter Group subject to the overall limits,” said the regulator.
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