In the recently concluded board meeting of the Insurance Regulatory and Development Authority of India (Irdai), the regulator has sought to provide greater flexibility to insurers as far as their corporate agency tie-ups are concerned, people in the know said.
The regulator has mooted the proposal that corporate agents can tie-up with up to 9 insurers each in the general, life, and health insurance sectors. Currently, corporate agents are permitted to distribute products of three insurance companies each in the life, health, and general insurance sector.
This would provide a significant boost to the bancassurance channel as insurers will be able to have more bank tie-ups, which in the recent years has proved to be one of the major distribution channels for insurers after the agency channel.
Further, they have proposed to allow corporate agents to place commercial lines general insurance covers without any limit on sum insured. And insurance marketing firms (IMF) can also have tie-ups with six insurance companies each in the life, health, and general insurance sector. Currently, they can solicit and procure insurance products of two insurers each in the three sectors.
Apart from distribution, the regulator has also proposed major changes to the investment norms of insurers, wherein they are seeking to revise criteria for insurers to invest in debt securities of InVITs & REITs, in AT1 bonds, among other things. Insurance companies, as of now, can invest in bonds of InvITs or Reits of any ratings, but if an instrument has a rating below AA, it becomes part of other than approved investments, and those above AA, become approved.
As per Irdai’s regulations, about 75 per cent of the insurance companies’ investments has to be in AAA-rated assets, 25 per cent can go to AA or even A- rated instruments. And, an insurance company can take exposure to below AA rated instruments only after taking approval from the board of the company.
Further, they are evaluating permitting equity derivatives for the sole purpose of hedging.
The regulator has also mooted the proposal of removing the requirement of insurers taking prior approval for issuing Other Forms of Capital (OFC). The permissible is also going to be expanded, wherein OFC of the insurer has to be lower of 50 per cent of the total paid up equity capital and securities premium; or 50 per cent of the net worth of the insurer.
Also, prior approval requirement for exercising call option under OFC issue has also been proposed to be removed, subject to the solvency ratio of the insurer not being less than 180 per cent.
As far as expenses of management is concerned, the regulator has proposed a limit on expense of management for general insurers, which should be lower of 30 per cent or expense rate of gross written premium. New players will, however, be exempted from this limit till they attain a certain size, not exceeding 10 years.
For life insurers, the expense of management will be monitored on an overall basis for par and non-par business. And, excess expenses will have to be borne by the shareholders.
These are proposals under consideration for amendments to various regulations. These proposals will be put by the regulator for stakeholder consultation, and for comments.