Life insurers not allowed to participate in repo transactions: IRDA

The Insurance Regulatory and Development Authority (IRDA) said that life insurance companies are not allowed to take part in repo transactions. In a circular IRDA clarified that:

  • In case of reverse repo (lending) transactions in government securities and corporate debt securities, the exposure should not exceed 10% of all funds taken together.
  • Even at segregated fund level, exposure should not exceed 10% of the fund size.
  • For non-life insurers, the exposure to reverse repo and repo transactions in government securities and corporate debt securities should not exceed 10% of investment assets of the insurer.
  • The tenure of repo transactions shall not exceed a period of six months.
  • All companies would have to take prior sanction from investment committee before participating in repo transactions.
  • The underlying debt security would have to be listed and have a minimum rating of AA or equivalent
  • Reverse repo and repo transactions in corporate debt securities would not be allowed b/w insurer and its promoter group entities
  • In terms of matters like accounting methodology and reporting of trades for reverse repo and repo transactions, companies would have to follow the January 2010 directions of RBI.

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