Insurance Investment Norms Fixed

The government yesterday stipulated a minimum investment of 25 per cent each in government and other approved securities for life insurance companies. It has also fixed a minimum investment of 15 per cent in infrastructure and social sector while the balance 35 per cent will be free for investment in the capital market. In case of pension and general annuity companies, IRDA has stipulated a minimum 40 per cent investment in government and other approved securities, of which not less than 20 per cent must be invested in government securities. The remaining 60 per cent can be invested in other instruments. For general insurance, investment in government securities and other securities cannot be less than 30 per cent with an additional investment in infrastructure and social sector pegged at not less than 10 per cent. Also, 5 per cent of the total capital employed has to be invested in housing and loans to state governments for housing and fire fighting leaving 55 per cent free for investment in capital market. Earlier, Insurance Regulatory and Development Authority chairman N Rangachary said he will ask insurance companies to appoint auditors out of a list drawn out by the regulator.The list is to be prepared by IRDA in consultation with the Institute of Chartered Accountants of India. The insurance regulatory body is also going to ask insurance companies follow the system of joint audit to avoid lack of audit at any point of time. "There will be two auditors, one with a tenure of four years and the second with a five year tenure. He said the norms would make it mandatory for insurance companies to have a seperate investment committee to look into the investments by the respective companies. It should be headed by the chief executive officer and have two non-executive directors, chiefs for investment and finance. In case of life insurance companies, the appointed actuary will also be the member of the committee, he said. Speaking at a seminar organised by the Federation of Indian Chambers of Commerce and Industry, on accounting norms for the sector, Rangachary said separate statements would be required for any activity which yields 10 per cent or more revenue. Special secretary, insurance, PK Banerjee said that in the liberalised scenario, annuity and pension products are likely to be offered not only by insurers, but by different types of financial institutions regulated by different authority. He said with the opening up of the insurance sector, the prospective insurers see a vast untapped market for personal pensions in the country. "Government will have to devise a suitable regulatory framework to ensure safety of returns to the insurer," he said. , adding that in these circumstances the role of professional fund manager will be of critical importance. He said the implementation of oasis report will create an intricate yet reliable structure to serve millions of people of india. Addressing the seminar, minister of state for social justice and empowerment Maneka Gandhi said that Dave committee report which suggested pension funds to invest in equities and bringing in unorganised sector within the social security net, will be taken before the cabinet soon. The committee, headed by former UTI chairman S A Dave, was set up by the ministry of social justice and empowerment, and had already submitted two reports to the government. The report had suggested that pension funds should be given the freedom to invest in equities saying no insturment could match the returns given by equity over the long run.