IRDA wants insurers to take active interest in firms they invest in

The insurance regulator wants insurers to become more active on issues related to corporate governance in listed companies.

The move assumes significance as insurance companies hold significant stakes in listed Indian entities. Life insurance companies manage assets of over ₹19-lakh crore, with Life Insurance Corporation of India (LIC) being the largest domestic institutional investor managing assets of over ₹13-lakh crore.

TS Vijayan, Chairman of the Insurance Regulatory and Development Authority (IRDA), at a recent seminar in Mumbai said: “It is time insurance companies looked at the corporate governance practices of companies in which they are investing.

“I believe these practices will come so that investment managers of insurance companies can get the best returns while ensuring safety of the investments for policyholders.”

According to reports, the capital market regulator Securities and Exchange Board of India (SEBI) has been in discussion with IRDA urging it to ask insurers to be more vigilant with regard to corporate governance of companies.

Currently, while SEBI has issued norms for mutual funds governing their voting record, there are no norms for insurers on improving corporate governance in listed companies.

In 2013, the Finance Ministry had asked LIC, which is seen as a passive investor in many companies despite holding significant stakes, to place nominees on boards of all companies in which it has significant investments to help protect shareholder interest.

The Chief Investment Officer of a large private life insurance company said that over the last year, insurance companies have been more active investors and have started exercising their voting rights in a bid to protect the interests of policyholders.

In July, in a rare case of investor activism, shareholders rejected the compensation payment in excess of prescribed limits to three directors of Tata Motors.

Vijayan also said that a committee formed by IRDA has submitted a report on risk-based solvency norms.

“The solvency regime at present does not give any appropriate credit for appropriate risk strategy in arriving at solvency. In contrast, the risk-based solvency margin regime will explicitly incentivise insurers to adopt a comprehensive risk-management framework for capital requirement,” said Vijayan.