Cap only on new investments.
Hyderabad: Here is some good news for insurance companies, including Life Insurance Corporation (LIC). They need not dilute their existing stake in individual companies to below 10 per cent in case they were made prior to August 2008.
“There is no need to apply the 10 per cent cap on investment in individual companies to the investments made prior to announcement of new norms,” Mr J Hari Narayan, Chairman, Insurance Regulatory and Development Authority (IRDA), told Business Line here on Friday.
The 10 per cent cap is applicable only to the fresh investments after the announcement of new norms, he clarified. “We don’t make any distinction between LIC and others. Anybody who is into insurance will have to adhere to this norm,” the IRDA chief said.
It may be noted that according to the recently-revised norms on investment by the insurers, IRDA has imposed a cap of 10 per cent (of the outstanding shares of the company/fund size) on the investment in a single company.
The State life insurer has investments ranging from over 10 per cent to 30 per cent in more than a dozen corporate entities, including Larsen and Toubro and ITC.
The objective of the regulator is to facilitate a larger flow of funds to market and provide a level-playing field and there should be significant investments by the insurance companies.
There is, however, relaxation from the 10 per cent cap in the investment made into the infrastructure sector. “The insurers can now invest up to 20 per cent of their funds in infrastructure and housing sector with an additional 5 per cent debt investment if it is investing in one company,” Mr Narayan said.
