Irda Likely To Relax Money Mart Guidelines

The domestic money market likely to get a booster with the Insurance Regulatory and Development Authority (Irda) may increase the proportion of investments made by insurance companies in money market instruments. The regulator may increase the slab for investments to be made by insurance companies in money market instruments to a high of 40-50% of total assets under management from the present 20 per cent. The freedom to infuse more in money market instruments will be for those policies which are nearing maturity. Money market instruments are very short term in nature with less than one year of maturity and ensure maximum liquidity. Such instruments comprise treasury bills, certificates of deposits, commercial papers, repurchase agreements (repo and reverse repo) and the like. In its discussions with market participants, the Irda has observed that the restrictive guidelines for insurance companies investments make it difficult for them to meet the redemption pressure once policies near maturity. Meanwhile, the regulator, in pushing forward the second generation of reforms for the insurance sector, has decided to make the solvency ratio risk-based. The Irda will prescribe solvency ratio-linked criteria, when the promoters decide to invest additional capital to resurrect their company.