Insurers allowed to invest in banks’ new instruments

17-Feb-2014

Experts said that this will help banks to augment additional capitalThe Insurance Regulatory and Development Authority (Irda) has allowed insurance companies to invest in new instruments issued by domestic banks. This includes debt capital instruments, redeemable non-cumulative preference shares and redeemable cumulative preference shares under Tier-II capital. Experts said this would help banks augment additional capital, even though private insurers do not have a very large investment capacity like state-owned Life Insurance Corporation of India (LIC). 

"Though this option has been opened up for all insurers, we would primarily see LIC investing in these issues since it has large investable funds at its disposal," said an investment official with a private life insurance firm. Irda had earlier allowed insurers to invest in perpetual debt instruments of banks’ Tier-I capital and debt capital instruments of upper Tier-II capital. "With the migration of banks to Basel-III capital adequacy norms, there is a substantial need for raising additional capital by banks. 

Globally, banks have started augmenting capital by issuance of Common Equity Tier-I (CET-I), Additional Tier-I(AT-I) and Tie- II (T-II) instruments," Irda noted. The regulator has said the debt instrument issued by banks shall be rated not less than ‘AA’ by an independent, reputed and recognised rating agency, registered under market regulator Sebi. Further, if the instruments are downgraded below AA, such investments shall be re-classified as ‘Other Investments’....KSP

Things to know about reviving a lapsed insurance policy

12-Feb-2014

Save precious time tracking your investments
A life insurance policy lapses when the due premium has not been paid even within the grace period. A lapsed policy means that the benefit of insurance will not be available to protect the financial interest of the dependants in the event of the death of the insured. A lapsed cover can be revived by the policyholder during the period allowed by insurer before its maturity. The procedure for revival depends on the type of policy and the duration of its lapse.

Reinstatement:
The documentation requirements for revival or reinstatement of a policy depend on the time elapsed between the date of lapsation and the date when the request for revival has been made by the policyholder.

Premium payment:
In order to revive a lapsed policy, the unpaid premium, along with interest on the delayed premium at a rate specified by the insurer, has to be paid. The company may also impose a penalty.

Processing:
A statement of health or certificate of insurability may also have to be given to the insurance company. It needs to be filled in, signed and supported by identity and address proof documents.

Points to note 
> Revival is a fresh contract between the insurance company and the insured, and the former can impose fresh terms and conditions at this time.

> Insurance companies can provide continued cover for a lapsed policy at a lower amount and to the extent of the paid-up value of the policy.

> If the policy is not revived within the prescribed period, its surrender value is paid to the insured.

The content on this page is courtesy Centre for Investment Education and Learning (CIEL).......KSP