Friday, September 12, 2008

Insurance Companies are largest investor in stock market during 2007-08

The insurance industry emerged as the largest investor in the stock market during 2007-08, surpassing FIIs, riding on the huge popularity of unit-linked insurance products (ULIPs), according to the Life Insurance Council, an apex organisation of all life insurance companies in India.

The council, in a briefing to the media here on Thursday, said the net investment by life insurance companies in equity markets during 2007-08 was Rs 55,000 crore against an investment of Rs 53,400 crore made by FIIs.

The investment by mutual funds in the same period was estimated at Rs 16,300 crore.

Referring to the popularity of ULIPs among investors, industry leaders said it was not that the insurance industry was promoting ULIPs, but it was customers who were preferring to invest in these products to help them participate in the stock market.

ULIP is a life insurance cover, in which the policy value at any time varies with the value of underlying asset at the time.

Life Insurance Council secretary general SB Mathur said the investment by insurance industry in the stock market in the first four months of this financial year was around Rs 25,000 crore.

During 2006-07, investment by insurance companies in equities was only Rs 20,000 crore. SBI Life Insurance Company managing director and CEO US Roy said it was for the first time that the investment by insurance companies in the stock market was higher than the foreign funds.

According to the council, 80% of life insurance business during the last financial year was received by way of ULIPs. Besides, an official said large investment made by the industry has helped the market to stabilise.

He said it was an international trend as more people are getting attracted to the markets. Although, investment by the industry in the markets is on the rise, it continues to be the major investor in government paper.

According to the council, investment by the industry in government securities during FY 2007 was Rs 2,75,000 crore while for FY 2008, the investment (provisional) was Rs 3,37,000 crore.

The council said the life insurance industry had assets under management worth Rs 8,47,000 crore as of March 31, 2008.