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NEW DELHI: The Insurance Regulatory and Development Authority of India (Irdai) on Friday hiked maximum investment limit of insurers in banking, financial services and insurance (BFSI) companies to 30% of their assets from 25%.

As per the latest changes to Irdai’s investment Regulations, 2016, the exposure limit for financial and insurance activities will now stand at 30% of investment assets for all insurers. Investment in housing financing companies and infrastructure financing companies will be a part of this.

Experts feel that the hike by the regulator will help insurers bring their exposure to financial and insurance activities near broader Indian market indices.

For example, the weightage of financial services companies, which include, large banks, non-banking financial companies (NBFCs) and insurance companies, currently stands at around 35%.

According to Sampath Reddy, chief investment officer, Bajaj Allianz Life Insurance Co. Ltd, the weightage of the financial and insurance companies in broader Indian market indices has consistently gone up over the last few years.

“The life insurance industry had been seeking an increase in the current 25% sectoral limit on exposure to the BFSI Sector. The increase will provide the much-needed leeway for insurance companies to increase their exposure to the sector, and bring it closer to the broader market levels," Reddy said.

Reddy believes that with Irdai’s move, insurance companies would be in a position to hold a much wider basket of diverse stocks within the sector.

According to Mayank Gupta, co-founder and chief operating officer of Zopper, an insurtech company, the increase of investment assets capping from 25% to 30% is a great step for insurance companies.

“This will provide more room for insurers to optimise their investment strategy, thereby giving potentially higher investment income in their profit & loss. The domino effect of this may be seen in more eased out claim settlement policies, which will eventually translate into better claim reimbursement experience for the end customers."

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