IRDA message reposes faith in local insurance cos HYDERABAD: Barely two days after the Federal Reserve rescued US insurer AIG, the Insurance Regulatory and Development Authority (IRDA) made it clear that the turmoil in the international markets would have no bearing on the financial health of domestic insurance companies. A specific reference was made to private insurance companies.
AIG was on the brink of bankruptcy due to the strain caused by the subprime mortgage crisis in the US. The Fed decided to provide a $85-billion emergency loan to help AIG meet its obligations. In return, the US government would get a 79.9% stake in AIG. The US insurer holds a 26% stake each in Tata AIG Life and Tata AIG General Insurance companies. An obvious question was whether Tata Sons, which holds a majority stake in the two ventures, would buy out AIG's equity stake. "As a matter of policy, we do not respond to speculative enquiries or comment on partnership/joint venture matters. All that we would like to say is that the Tata AIG Life and General Insurance companies are well capitalised and subject to stringent regulatory requirements," a Tata Sons spokesperson told ET. IRDA's first quarter analysis of the solvency margins of these two companies showed that the solvency ratio was comfortable for both Tata AIG Life and Tata AIG General Insurance. Solvency refers to the excess of assets over liabilities that an insurer maintains as a prudential measure in the interest of policyholders. The analysis came in handy to assure policyholders that their investments were safe. IRDA chairman J Harinarayan followed the normal procedure of seeking a status-report from these companies on the business implications, if any, here of AIG's move to access the Fed's borrowing window. Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Many policyholders had become jittery following rumours that it was perhaps unsafe to invest in products sold by private insurers. As IRDA was keen on setting the record straight, Member actuary R Kannan sent out a message (press release) saying the solvency margins for all companies, including private ones, were adequate and above the prescribed minimum of 150%. He also clarified that no insurance company had invested money overseas and that their investments were in sync with the norms. IRDA's investment regulations debar domestic insurance companies from having any exposure in international credit rating instruments. Domestic insurers also set aside reserves to meet future claims as per prudential norms. The regulatory body reckoned that the mathematical reserves were adequate to take care of future liabilities. This press release was circulated to CEOs of all insurance companies. A regulator's mandate is to ensure financial stability of the sector and also assure policyholders about the safety of their investments. Such an assurance gives comfort, particularly for the poor and the middle class, who buy insurance products. And more so, in turbulent times as now. The IRDA did its job well. -- Visit site at – http://investorline.co.in/ Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Investor Forums- http://forums.investorline.co.in/ Iwebs Open Source Web Publishing Platform - http://webs.investorline.co.in/iwebs/ --~--~---------~--~----~------------~-------~--~----~ Get latest market updates & search internet right from your browser-download our toolbar here- http://investorline.ourtoolbar.com/ Visit our site at – http://investorline.co.in/ Newsroom: http://newsroom.investorline.co.in/ Learning Center- http://learning.investorline.co.in/ Mutual funds - http://mutualfunds.investorline.co.in/ Life Insurance - http://insurance.investorline.co.in/ Investor Journal - http://research.investorline.co.in/ Newscatcher- http://catcher.investorline.co.in/ Interested in Financial Planning-Let us Contact you- http://spreadsheets.google.com/viewform?key=pb_z4f1_zGMg4iBBFT3-SWQ&email=true If you like the site then promote it here- https://www.freetellafriend.com/tell/?url=http://investorline.co.in/blogs/news Create your own free blog on- http://investorline.co.in/blogger Visit this group at http://groups.google.com/group/india-investor -~----------~----~----~----~------~----~------~--~---
