The insurance regulator may soon allow equity investment even in non-dividend paying companies to be included in the approved investment category, reported The Economic Times.
However, this would be subject to certain conditions.
This new proposed rule, if implemented, would increase the investing universe of companies they can invest in, boosting allocation to stocks.
Under the existing norms, only investment in listed companies that have paid a minimum 10 percent dividend for at least two consecutive years immediately preceding can be included in the approved category.
A committee set up by the regulator last year had recommended allowing insurers to invest in equity sans the dividend criterion.
The Insurance Regulatory Development Authority of India (IRDAI) had relaxed the dividend norm following the pandemic for the year April 1, 2020 to March 31, 2021 when many companies were forced to skip dividends. In August, it notified that the relaxation will continue beyond September 2022.
The regulator allowed investment in equity shares of firms that paid dividends "for at least two years out of three consecutive years immediately preceding” to be categorised as “approved investment”.
It is worth pointing out that life insurers can invest up to 50 percent of controlled fund in other approved instruments, which besides shares and preference shares includes bonds and other debt instruments. This limit is a higher 70 percent in unit linked insurance business.