Custom Search

Wednesday, September 26, 2012

IRDA working on mechanism for faster approval of products

The Insurance Regulatory and Development Authority of India (IRDA) is expected to come out soon with a mechanism for faster regulatory approval of new insurance products. The regulator will also encourage companies to launch low premium products for increasing insurance penetration.

A broad roadmap for the development of insurance sector is expected to be out any time now. This issue has become important after the Prime Minister and the Finance Minister promised measures for the insurance sector. In this regard, the Finance Minister P Chidambaram discussed possible measures with IRDA Chairman J Hari Narayan on Wednesday.

Coming out of the meeting, Financial Services Secretary D.K. Mittal said, “Roadmap have been agreed upon for faster approval of products (by IRDA).” The meeting also dealt with issues relating to increasing insurance penetration, service tax and augmenting investment flow into the infrastructure sector.

“The meeting discussed how to increase insurance penetration, how insurance companies can do more business, how better products can be introduced at lower premium, and how more investments can flow into infrastructure sector,” Mittal said.

The insurance companies have been demanding faster clearances of products from IRDA. Earlier in a meeting with Chidambaram, relaxation in investment norms to help the sector earn more premium was also discussed.

The Finance Ministry is now looking at the possibility of relaxing norms for insurance companies to attract more funds for the infrastructure sector as part of efforts to prop up the sagging growth rate.

According to our estimates, the investment corpus with the life insurance companies is around Rs 13 lakh crore. Of this, only 20 per cent currently goes towards the infrastructure sector. Going by the current Insurance Regulatory Development Authority (IRDA) norms, insurance companies can invest only in highest rated ‘AAA’ or ‘AA’ credit-rated debt paper.

Life insurance companies are allowed to invest up to 50 per cent in Government securities, 15 per cent in infrastructure bonds and 35 per cent in other investment grade corporate bonds and equities. The regulator is mulling options to allow sector companies to invest more in non-AAA rated securities, including ‘A+’ and ‘A’ papers of corporates.

Last year, the Department of Industrial Policy and Promotion (DIPP) had favoured allowing life insurance companies to invest in greater quantity in non-AAA rated debt instruments to encourage flow of funds to the infrastructure projects. The country needs about a trillion dollars of (Rs 54 lakh crore) investment in the infra space during the 12th Five Year Plan (2012-17).


Post a Comment

Popular Posts

Desi Google | A2Z Famous Quotes | What's Cooking America | Joke Site