Insurance regulator IRDA today said it will give Life Insurance Corp 'reasonable time' to bring down its stake in various companies to 10 per cent. "We do not want forced sale by LIC so that it gets lower returns. We want to give reasonable time so that transition is smooth," IRDA member R Kannan told reporters in New Delhi.
The regulator is in correspondence with the LIC and IRDA will definitely give due consideration, he said.
The statement assumes significance in the wake of the investment guidelines issued by the Insurance Regulatory and Development Authority last month that prohibits an insurer from investing more than 10 per cent in a company.
Prominent companies in which LIC holds over 10 per cent include Corporation Bank, Cipla, M&M, Maruti Suzuki, MTNL, Tata Motors, HPCL, Ranbaxy Labs, Oriental Bank, Dr Reddy's Labs, Tata Steel and Reliance Infra. The insurer has invested more than Rs 1.3 lakh crore (Rs 1,300 billion) in equities of different private and public sector companies.
On risk-based capital, he said the roadmap would evolve by March 2009. When the world is moving towards Solvency II, there is need for the Indian insurance sector to adopt to new capital risk norms, he said. The solvency margin prescribed today are very adequate, he said, adding Indian insurers have no external investments so there is no cause of worry.
On the issue of Tata AIG, Kannan said in the light of change in the structure of American International Group, the regulator has sought a business report from the insurance venture. "What is the local partner going to do as a regulator we wanted to know," he said.
AIG, through a joint venture with Tata Group, is into life and non-life business in India. Although the Tata Group has majority stake of 74 per cent in both the ventures, the remaining 26 per cent is with AIG.
IRDA, however, noted that the accounts of these two firms as on March 31, 2008, indicate that both companies have satisfactory solvency margins which are adequate to meet their liabilities.
