Indian regulator makes request for state-owned insurer’s divestment plans

Insurer instructed by regulator to reduce holdings in other firms to levels in line with industry norms

Indian regulator makes request for state-owned insurer’s divestment plans

Insurance News

By Gabriel Olano

The Insurance Regulatory and Development Authority of India (IRDAI) has requested state-run Life Insurance Corporation of India (LIC) to produce a roadmap of how it will divest of its holdings in several blue-chip firms, which are above the industry norm of 15%.

LIC, being a state-owned corporation with a legacy of over 60 years, has special privileges with regard to investment caps in other firms.

“We have asked the LIC to give a roadmap for reducing stakes in companies where they own more than 15%,”an IRDAI official told the Economic Times. “We are yet to hear from LIC on the matter.”

The insurer has been accused of acting as a piggy bank for the Indian government whenever it was unable to invest in equities of state-run firms, mostly banks. This led to its exemption from many investment regulations other companies must comply with.

“This is the second time we have written to the LIC asking them for a roadmap on bringing down its stake,” said the official. However, the IRDAI has not given any hard deadline for the insurer to respond.

Currently, LIC has holdings of over 15% in several entities, including tobacco company ITC, Standard Battery, engineering firm Larsen & Toubro, and state-run Corporation Bank. In 2013, IRDAI recommended that insurers observe equity ownership caps of 10% per company to limit risks. But larger insurers can gradually increase their holdings to 12% then later to 15% as they grow.

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