Irdai asks insurers to give details on exposure to DHFL, IL&FS, ADAG

All the four entities, for which data was sought by Irdai on October 9, have been downgraded by credit rating agencies recently.

The Insurance Regulatory and Development Authority of India (Irdai) has sought data from companies on their exposure to Infrastructure Leasing & Financial Services (IL&FS), Dewan Housing Finance Corporation (DHFL), Indiabulls, and Anil Dhirbubhai Ambani group companies, sources aware of the development said.

“The regulator perhaps wants to see the strength of the insurance companies," said the chief executive officer of a life insurance company. All the four entities, for which data was sought by Irdai on October 9, have been downgraded by credit rating agencies recently.

“Usually, it is left to the insurers on how they deal with downgraded entities. But this may have been done to find if there is any over exposure the insurers have against their asset base," said a former member of Irdai.

When an entity is downgraded, insures' investment in such entities is clubbed under the unapproved investment kitty and the insurers are allowed to have 10 per cent of their investment in the unapproved investment.

“If the 10 per cent is breached, there might be some problem, but so far the 10 per cent threshold has not been breached by any insurer," experts said.

There might be concern on the solvency of insurers having exposure to the four entities, the former member of Irdai quoted above said. If such a situation arises wherein the rating downgrade of an entity threatens the solvency margin of an insurer, the insurer has to infuse fresh capital to maintain a solvency margin of 1.5.

The Irdai had in the past asked insurers with exposure to IL&FS to provide for their exposure. A lot of insurers including the state-owned behemoth Life Insurance Corporation have exposure to IL&FS.

Business Standard