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Ahead of LIC IPO, Irdai allows insurers to invest more in BFSI


Paving the way for more investment in the financial sector and insurance companies, insurance regulator Irdai has hiked the exposure limit of insurance companies in such companies to 30 per cent.

The hike in the exposure limit comes ahead of the mega IPO of Life Insurance Corporation (LIC). “The Authority in exercise of its powers conferred under the Irdai (Investment) Regulations, 2016, permits all insurers to have exposure to financial and insurance activities (as per section K of NIC classification) up to 30 per cent of investment assets. Accordingly, the limit of 25 per cent of investment assets mentioned in Irdai (Investment) Regulations, 2016 stands revised to a limit of 30 per cent of Investment Assets,” Irdai said in a circular. The Irdai move is expected to allow insurance companies to invest more funds in the LIC IPO, insurance officials said.

Weightage of financial and insurance companies in broader Indian market indices has consistently gone up over the last few years. “Life insurance industry had been seeking an increase in the current 25 per cent sectoral limit on exposure to the BFSI sector. The increase in this limit to 30 per cent will provide the much-needed leeway for the insurance companies to increase their exposure to the sector and bring it closer to the broader market levels,” said Sampath Reddy, chief investment officer, Bajaj Allianz Life.

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“Additionally, they would also be in position to hold a much wider basket of diverse stocks within the sector and participate in the promising Indian growth story through the same,” Reddy said. LIC on Wednesday priced its initial public offering (IPO) in the range of Rs 902-949 per share. LIC IPO will open on May 4 and will close on May 9.

Insurance companies led by LIC, New India Assurance and others are major players in the capital market. LIC is the largest investor in stock markets. LIC booked profit worth Rs 42,862 crore from the sale of investments, mainly from equities, in the first nine months of the fiscal year 2022.

In 2013, Irdai allowed insurance companies to hold up to 15 per cent stake in any company, up from 10 per cent.





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