NEW DELHI: State-owned Life Insurance Corporation of India (LIC) is engaging with key financial regulators, including the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi), to expand the availability of long-term investment instruments as inflows into its annuity products continue to rise, said CEO and MD R Doraiswamy.
Understanding Annuity Products
An annuity product converts an accumulated retirement corpus into a guaranteed, lifelong stream of income. When an individual invests a lump sum, LIC pays a regular pension for life, ensuring that the savings are not outlived.
“When the annuity markets are becoming more favoured by the policyholders, and more investments flow into annuities, we need to necessarily have long-term investments matching those long-term liabilities. So we have been in touch with the (insurance) regulator as well as the regulators like Sebi, as well as RBI and the requirements of LIC, particularly, are being duly communicated to them,” he said.
Regulatory Engagement
Doraiswamy noted that the sector regulator, the Insurance Regulatory and Development Authority of India (Irdai), has also been taking proactive steps to ensure that the evolving needs of the market are fully met by the insurance company.
“Given the fact that insurance companies generate long-term funds, they go on to meet the long-term financing requirements in terms of infrastructure needs and nation-building. The regulations are also getting aligned with the requirements. So, it is a win-win situation for both of us. We keep working together,” he added.
Long-term Portfolio
LIC has a substantial portfolio of annuity business, which is very long-tailed, with liabilities running into 30, 40, or even 50 years. Therefore, the investment of funds is based on the underlying business and the underlying fund.
When asked if LIC could sustain a high net Value of New Business (VNB) margin of over 20% in FY27 as well, Doraiswamy said the corporation's effort is to ensure that the VNB margin, or the gross VNB, as well as performance in almost all parameters, continue to improve.
