Irda Cautions Insurance Sector Against Asset-Liability Mismatches

New Delhi, January 20: | Updated: Jan 21 2003, 05:30am hrs
Insurance companies must guard against asset-liability mismatch in the present falling interest rate scenario and lack of long-term rated paper, according to the Insurance Regulatory and Development Authority (Irda). Chairman N Rangachary also cautioned against new types of risks like terrorism and catastrophes.

"Asset-liability management will become some sort of a worry if there arent many long-term and safe investment avenues available. With a docile capital market, where will investments of insurance sector go" he queried during his address at the third international conference for emerging markets here on Monday.

Mr Rangachary pointed out that "new genre of risks such as terrorism and catastrophic risks due to climatic changes caused by factors like global warming are testing the limits of insurability." Referring to rapid globalisation and integration of financial markets, he said it has brought complexities, risks and vulnerability as reflected by the 1997 Asian crisis.

"In this regard, there is an immediate need in emerging markets to upgrade legal frameworks, accounting standards and put in place sound financial regulations and improve banking systems, which in many cases remain very fragile," he added.

United Nations Conference on Trade and Development investment expert Nigel Easton observed that India is the second largest market with its population and there will be rapid growth in the insurance sector. "However, lack of size of capital market and adequate investment opportunities may put the brakes on growth," he said.