As it is, say public sector officials, margins are likely to come under pressure with the opening of the sector to private enterprise. This, in turn, would imply a lesser availability of investible surpluses. The rate of growth of investment depends directly on the investible surplus generated from underwriting operations as well as the rate of return on existing investments.

In the case of non-life insurers, for instance, the returns have been fluctuating in the 13-14 per cent range over the last five years, but insurers expect them to dip below 13 per cent in the coming years with a much tighter squeeze on margins. Till last year, the guidelines for investment as laid down by the government specified the following pattern of investment of accretion of funds by general insurance companies:

Central government securities - not less than 20 per cent; state government securities and other government guaranteed securities, including Central government securities - not less than 30 per cent; loans to Hudco and state governments for housing and fire-fighting equipment - not less than 15 per cent and; market sector investments (subject to prudential and any other guidelines and provisions of Insurance Act, 1938) - not more than 55 per cent.

In August 2000, the Insurance Regulatory and Development Authority (Irda) in its notification on the pattern of investment of the total assets of a general insurer had retained the same percentage for government and state securities, but bifurcated the next slab into housing and housing loans to state governments and fire-fighting equipment (not less than 5 per cent), investment approved investments, infrastructure and social sector (not less than 10 per cent) and others (not exceeding 30 per cent) with other non-approved investments not exceeding 25 per cent.

These investments are of course subject to industry norms for investment in different instruments as well as exposure/prudential norms.

In the Seventh Plan, non-life insurers alone contributed Rs 340 crore in Central securities, in the Eighth Plan Rs 1,581 crore and in the Ninth Plan until 1999-2000 Rs 1,745 crore. In the same periods, they contributed Rs 246 crore, Rs 213 crore and Rs 1,272 crore in state and other approved securities, and Rs 293 crore, Rs 411 crore and Rs 441 crore, respectively, in the housing sector.