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.