Regulator’s move aimed at avoiding liability mismatch of insurers.
The Insurance Regulatory and Development Authority (Irda) will request the finance ministry to take steps to increase availability of more longer-term securities for insurance companies to invest in as they are facing an asset-liability mismatch.
“In the market, long-term securities are less. We want more ten-, twenty- and thirty-year bond floats in the market for insurance companies,” Irda Chairman J Harinarayan said at an insurance seminar organised by industry body Ficci here.
The regulator was concerned that instruments in which insurance companies have invested in have a term of maturity shorter than the liability that they have.
The regulator is also considering to reform the valuation norms for insurance companies’ investments in various products. Harinaraynan said the regulator is considering a concept of mark-to-market for the entire investment portfolio of insurance companies, which may be in line with the one existing for banks.
The insurance regulator is also working on evolving merger and acquisition guidelines for the insurance sector as management cost of insurance firms has become a huge cause for concern.
“Given what is happening in the financial markets, it is an opportune time for mergers and acquisitions,” Harinarayan said. “We will be putting up the regulations by March next year for discussion with the industry,” he added.
The regulator is also mulling to allow insurance firms to outsource non-core business and rationalisation of insurance intermediaries.
On the recent terror strike in Mumbai and insurance claims, the Irda chief said the claims are in the process of flowing in and it will take some time to assess the full impact. However, he said previous experiences show that many shops and establishments were not covered by proper insurance.
In the wake of the terror strike, he expressed hope that more people would go for terror cover and the terror insurance corpus was likely to go up from the current level of Rs 750 crore.
“Terror insurance products are bound to be upgraded and the rate of premia might change depending upon the evolution of new products that the industry may come up with,” he said. India’s insurance sector is expected to grow 17 per cent in the 2008-09 financial year if the economy grows at 7.6 per cent, he said.
