Page 125 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes 13. The accounts of the Authority shall be audited by the ………………………… and
……………………………………… of India.
14. The Authority shall furnish to the Central Government statements and other particulars
in regard to any proposed or existing programme for the ……………………………… and
development of the insurance industry.

Case Study IRDA Tweaks Investment Norms for
Insurance Companies

RDA tweaked norms for insurance companies to invest their funds in different market
instruments like government securities and corporate debt to channelize long term
Isavings in infrastructure sector.
Life insurance companies can now be invested in central government securities which
should not be less than 25 per cent of the total corpus, Insurance Regulatory Development
Authority (IRDA) said in a notification.
However, the total investment in central government securities, state government
securities and other approved securities cannot be less than 50 per cent taken together.

At the same time, it has allowed life insurers to invest in housing and infrastructure
bonds, with ratings of not less than AA by credit rating agencies. The total investment in
the category will not be less than 15 per cent.
On pension funds, the guidelines said money generated from them will be invested in the
government bonds, up to 40 per cent of the fund value, while not more than 60 per cent
would be invested in other approved instruments.
As for investments in ULIP funds, the guidelines said that at least 30 per cent of the fund
value would be invested in government securities and 5 per cent can be invested in
housing and infrastructure bonds.
The remaining can be invested in the other approved investment categories.

Question
Analyse the pros and cons of these tweaks issued by IRDA.

Source: http://articles.economictimes.indiatimes.com/2013-03-07/news/37531996_1_infrastructure-
bonds-irda-ulip

7.5 Summary

In early 90’s, with the world market forces playing with full strength; growing literacy
level; better regulatory systems and need for fast growth in this sector, the need of the
hour was to go with the world and throw open Life & General Insurance Sector to private
entrepreneurs once again so that there is no monopoly and the customer/consumer/
buyer gets more choices than one type of Insurance product.

Full force and maximum utility of various institutions like Advisory Committee and self-
regulatory organizations are not yet realized in India as the regulator seems to be in a
long-learning mode.

120 LOVELY PROFESSIONAL UNIVERSITY