The authority believes that this is commensurate and appropriate given the size of funds under consideration without adversely affecting the prudential management of investments, Irda said on its website on Friday. The finance ministry has been favourably inclined to allowing insurers to park a larger share of their corpus in equities. The government had earlier allowed Life Insurance Corporation of India (LIC) to hold up to 30% of the equity of a company in a move aimed at helping its disinvestment programme. LIC has bailed out stake sales of several of the disinvestment candidates in the past.
The insurance regulator, however, had spoken out against the move, calling it imprudent while stating that LIC should be treated at par with all other private insurers. As per the Insurance Act, 1999, an insurance firm is allowed to hold up to 10% equity in a company. The finance ministry had raised the investment cap after pointing out that the LIC Act, 1959, supersedes the Insurance Act. As per the LIC Act, the state-run life insurer could invest up to 30% of its total funds in a single entity. When any subject matter of law is concerned, they do consult the concerned regulator. On this matter there has been no consultation yet, J Hari Narayan, chairman, Irda had said in January.
In 2011-12, the total collection of premiums by life insurance companies was R2,87,072 crore compared with R2,91,639 crore in the previous year, a drop of 1.5%. Premiums have been sluggish ever since August 2010, when the regulator slashed the commissions that agents could charge on unit-linked insurance Plans (Ulips). While earlier the bulk of the premiums more than 70% came into Ulips, that share is now down to 15%. The premiums that were invested in Ulips fell 36% 2011-12 over the previous year.