Allowing insurance companies to park investors’ money in VC funds will jeopardise their future
A healthy tan is the first sign of skin cancer. Who so ever has said this must have an experience of the sort. However, the brains at Insurance Regulatory and Development Authority (IRDA) are yet to realise the fact. But, never mind, very soon they are going to get their share of experience. Without any doubt (which will be horrifying) not only for IRDA and insurance companies, but also for the poor investors, who knock doors of the insurers to safeguard their future. And, interestingly, all these will happen only because of the desire to earn a little more.
As per the fresh investment guidelines announced by the insurance regulator, life insurance companies are now allowed to invest in Venture Capital (VC) Funds. IRDA has allowed life insurers to invest 3% of their total investible corpus or 10% of the total size of the fund, whichever is lower, in VC funds. For general insurers, the limit is 5% of their investment assets or 10% of the fund size, whichever is lower, thus providing the insurers another asset class to invest. Prashant Sharma, Vice President - Investments, Max New York Life Insurance avers, “This is a high risk; high reward asset class and the policyholders who have the risk appetite can opt for it.” But don’t you think this is going to jeopardise the safety of investors’ money? Certainly, this has left many in dilemma about the feasibility of such investments.
A healthy tan is the first sign of skin cancer. Who so ever has said this must have an experience of the sort. However, the brains at Insurance Regulatory and Development Authority (IRDA) are yet to realise the fact. But, never mind, very soon they are going to get their share of experience. Without any doubt (which will be horrifying) not only for IRDA and insurance companies, but also for the poor investors, who knock doors of the insurers to safeguard their future. And, interestingly, all these will happen only because of the desire to earn a little more.
As per the fresh investment guidelines announced by the insurance regulator, life insurance companies are now allowed to invest in Venture Capital (VC) Funds. IRDA has allowed life insurers to invest 3% of their total investible corpus or 10% of the total size of the fund, whichever is lower, in VC funds. For general insurers, the limit is 5% of their investment assets or 10% of the fund size, whichever is lower, thus providing the insurers another asset class to invest. Prashant Sharma, Vice President - Investments, Max New York Life Insurance avers, “This is a high risk; high reward asset class and the policyholders who have the risk appetite can opt for it.” But don’t you think this is going to jeopardise the safety of investors’ money? Certainly, this has left many in dilemma about the feasibility of such investments.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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