Insurance is one of the frontline investment options not only as a life-risk hedging instrument but also because it is considered as a tax saving product. The investment advisory committee of the Insurance Regulatory and Development Authority is planning to give more freedoms to the insurance companies. The investment norms will be more flexible in accordance to the existing ones. These companies will become more flexible in taking discretionary steps in investments and in other relevant spheres. Policies are also been taken to facilitate the insurance companies to invest in liquid instruments. The present limit to invest in Gilt funds will be increased to 10-15 percent. Insurance companies will be allowed to invest in the instruments floated by the infrastructure developers. The infrastructure investment norms for the insurance companies will be in-line with that of the banks. Currently, several insurance companies are investing in different instruments like commercial paper and mortgages. According to the new recommendations the companies can invest in fixed income and equity derivatives. The derivative instruments will only be used for the purpose of hedging the portfolios’ risk and will not be used for trading purposes. These new relaxed investment norms are expected to help insurance companies in better management of funds and would encourage growth in the industry.
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