Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Opinion / Online-views/  No need to tighten rules, says insurance regulator
BackBack

No need to tighten rules, says insurance regulator

No need to tighten rules, says insurance regulator

Premium

New Delhi: The Indian insurance regulator has said there is no need to tighten rules as private insurers in which foreign firms have stakes have not been hurt by the global financial crisis. Indian insurance companies are well-capitalised and maintain an adequate solvency margin, a senior Insurance Regulatory and Development Authority (IRDA) official has said.

Click here to watch video

bd6cf7c4-8bd1-11dd-9dcc-000b5dabf613.flvSpeaking at the Birla Institute of Management and Technology conference at PHD House in Delhi on Friday, IRDA member R. Kannan also said the regulator had sought a business and not a solvency report from AIG. This has been done because the company is undergoing structural changes and not because it is concerned about whether TATA-AIG would be able to meet its customer commitments, he said. However, the regulator is keeping a close watch on the evolving global markets, he added.

The IRDA had last week started investigating whether the Indian units of American International Group were affected by the financial crisis in the US. AIG has a 26% stake in each of the two life and general insurance ventures with the Tata group. It had last week agreed to a $85 billion federal bailout that will give the US government 80% ownership, avoiding a possible collapse under mounting mortgage losses.

Closer home, with a view to manage financial and market volatility, IRDA had earlier asked Life Insurance Corp. to bring down its stake in companies to 10%. But the insurance regulator has now clarified that the insurance company will be given time to make this transition.

"It is an issue on which we are in touch with LIC and we may give them sufficient time. We don’t want forced sale so that LIC offloads shares in the market and get lower returns on investment," Kannan said.

At present, LIC owns more than 10% equity in companies like Corporation bank (27%), Ranbaxy Laboratories (15%), M & M (17.5%), ACC (15.9%), ITC (14.4%) and Reliance Infrastructure (11.5%).

IRDA is also considering introducing Risk Based Capital (RBC) norms to manage the acquisition of capital for insurance companies. Kannan said IRDA is presently mulling over the format and structure of these rules.

RBC norms decide the solvency margins for insurance companies. Solvency margin is the amount by which the assets of an insurer exceed its liabilities. The solvency ratio fluctuates according to the financial risk in markets as it increases or decreases. It stands at 150% for Indian insurance companies at present.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 26 Sep 2008, 07:48 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App