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Pvt insurers can invest up to 5% of funds in group cos

Insurance Regulatory and Development Authority has barred insurance companies promoted by big business houses including Reliance, Tatas and Birlas from investing more than 5 per cent of funds in their group companies.

The new IRDA Investment (Amendment) Regulations 2001 said "an insurer shall not have investments of more than 5 per cent in aggregate of its controlled funds in the case of life insurer, or five per cent in aggregate of its assets in case of non-life insurer, in the companies belonging to the promoters' groups."

The regulation is subject to IRDA'S prudential norms that an insurer should not invest more than 10 per cent in share capital, free reserves and bonds and debentures of a particular company, group or an industrial sector, at any point of time.

The new norms assume significance for most of private companies including Reliance General Insurance, Tata AIG General Insurance, Birla Sun Life, Royal Sundaram or even HDFC Standard Life and ICICI Prudential Life Insurance, which have several profitable group companies qualifying for the IRDA specified investment grades.

The IRDA norms are however flexible towards the old insurance companies including Life Insurance Corporation and the four former General Insurance Corporation arms.

LIC would be allowed to hold 20 per cent of shares, debenture or bonds issued by a company or 5 per cent of LIC's controlled funds, which ever is less.

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