Insurance investments highly regulated, need to allow more asset classes: LIC Chairman

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Investments for insurance companies are highly regulated and life insurers should be allowed more investment classes to enhance their liquidity, Life Insurance Corporation (LIC) of India Chairman Siddhartha Mohanty said.

“For insurance companies, so far as investment is concerned, it is highly regulated. So, new asset classes should also be allowed, like sovereign gold bonds, and equity derivatives. All these should also be allowed to insurance companies so that there will be more liquidity,” he said at SBI’s Banking and Economic Conclave.

In addition, despite being the largest debt investor, LIC does not have access to the Central Repository of Information on Large Credits (CRILIC) data, the debt data platform managed by RBI.

“It’s an irony that despite being the largest debt investor, we don’t have access to debt or the national debt database CRILIC,” Mohanty said adding currently the insurer has to make assessment and appraisals on the basis of reports in the public domain.

This lack of access tilts the balance negatively towards LIC as despite being the largest market participant, they “are not present on the panel at all”, he said, adding that LIC is in active discussions with RBI and expects the same to be rectified soon.

LIC has an exposure of over ₹45 lakh crore to capital markets and market instruments, of which over ₹3 lakh crore is invested in corporate debt and ₹10.5 lakh crore is in equity, he said. The remaining investments are in Central and State government securities.

Mohanty also called for more long-term securities to align with insurance companies’ asset-liability management, given that a bulk of their liabilities are long-term in nature. The central government introduced a 50-year paper in its borrowing calendar for H2 FY24.

He said there is a need to establish a comprehensive inter-regulatory framework to address operational challenges and facilitate regular interaction among all regulators. It should also include market participants to allow them to directly discuss their issues and present their case.

On the impact of the recent draft IRDAI guidelines, proposing a higher surrender value, especially for non-participating policies, and lower charges for life insurance companies, Mohantyu said that LIC will see a lower impact compared with other players.

The life insurer has submitted its feedback and comments to the regulator, along with other market participants. “We have given our comments to IRDAI. We’ll be impacted less but there will be an impact,” he said.