Irdai allows insurance companies to invest up to 30% of assets in the BFSI sector

NEW DELHI: India’s Insurance Regulatory and Development Authority (Irdai) on Friday raised the maximum limit for insurers to invest in banking, financial services and insurance (BFSI) companies to 30% of their assets against 25%.

In line with the latest amendments to the Irdai Investment Regulations, 2016, the exposure limit for financial and insurance activities will now be 30% of investment assets for all insurers. Investment in housing finance companies and infrastructure finance companies will be part of this.

Experts believe the regulator’s hike will help insurers bring their exposure to financial and insurance businesses closer to the broader indices of the Indian market.

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

According to Sampath Reddy, chief investment officer at Bajaj Allianz Life Insurance Co. Ltd, the weighting of financial and insurance companies in the broader indices of the Indian market has steadily increased over the past few years.

“The life insurance industry was looking to increase the current 25% sector limit on exposure to the BFSI sector. The increase will provide much-needed headroom for insurance companies to increase their exposure to the sector. and bringing it closer to the broader levels of the market,” Reddy said.

Reddy believes that with Irdai’s move, insurance companies would be able to hold a much larger basket of diversified stocks within the sector.

According to Mayank Gupta, co-founder and COO of Zopper, an insurtech company, increasing investment assets capping from 25% to 30% is a big step for insurance companies.

“This will give insurers more leeway to optimize their investment strategy, which will provide them with potentially higher investment income in their profit and loss. The domino effect of this can be seen in claims settlement policies more flexible, which will eventually result in a better claims experience for end customers.”

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Kristan F. Talley