“Other than Approved Investments”

GUIDELINES FOR MUTUAL FUND INVESTMENTS
1. As the term “Mutual Fund” is neither covered under Insurance Act, 1938 or by IRDA (Investment) Regulations, 2000 any Investment made in Mutual Funds will fall under the residuary category of investments namely “Other than Approved Investments” which in turn shall be subject to the limits prescribed in IRDA (Investment) Regulations, 2000 and the norms mentioned below. NORMS FOR MUTUAL FUND INVESTMENTS
2. The investment shall be restricted to Investment of temporary surpluses of the Insurer which may be placed in schemes of Mutual Funds comprising of Liquid Funds, Gilt or Debt Funds and the same shall be governed by the following norms:
i. The Mutual Fund should be registered with SEBI and be governed by SEBI (Mutual Funds) Regulations. 1996
ii. The insurer shall AT ALL TIMES ensure that the investments in Mutual Funds are diversified among the various Mutual Funds.
iii. The Board of the Insurer shall lay down proper Guidelines for selection of Mutual Funds and schemes permissible including exposure Norms to a Single Mutual Fund and to each Scheme of Mutual Fund so as to avoid concentration of Investment.
iv. Where, the schemes of mutual funds in which such investment is made by an by an Insurer is managed by an Investment Manager who is under the direct or indirect management or control of the Insurer or its promoter the same shall NOT exceed 20%* of the amount of Investments falling under “Other than approved Investments” subject to provision referred under Clause 5, pertaining to “Group” under IRDA (Investment) Regulations, 2000.
v. The Insurer shall NOT make any investment in shares or debentures of any private limited company in which investment, if any, is made by the Mutual Fund;
OVERALL INVESTMENT / EXPOSURE LIMIT
3. The investment in Mutual Funds AT ANY POINT OF TIME shall not exceed 50%* of Investment falling under “Other than Approved Investments” for both Life and General Insurance Companies
4. VALUATION OF MUTUAL FUND INVESTMENTS
4.1 For each of the Quarter, Mutual Fund units shall be reported at Weighted Average Cost. Also, the insurer shall mention the Market Value of such Mutual Funds (which shall reflect the increase / decrease in the NAV) in Form 3B of IRDA (Investment) Regulations, 2000,
4.2 A separate Fair Value Change Account segregated for each of the Mutual Fund Investment shall be maintained.
4.3 The unrealised gains / losses arising due to changes in fair value of the Mutual Funds shall be taken to “Fair Value Change – Mutual Fund” account. The Profit / Loss on sale of Mutual Fund units, shall include accumulated changes in the Fair value previously recognised in Mutual Funds under the heading “Fair Value Change – Mutual Fund” in respect of a particular Mutual Fund and being recycled to Revenue / Profit and Loss Account on actual sale of Mutual Fund units.
4.4 The Insurer shall assess, on each Balance Sheet date, whether any impairment has occurred to the Investment. An impairment loss shall be recognized as an expense in Revenue / Profit and Loss Account to the extent of the difference between the re-measured fair value of the Investment and its Weighted Average Cost as reduced by any previous impairment loss recognized as expenses in Revenue / Profit and Loss Account. Any reversal of impairment loss earlier recognized in Revenue / Profit and Loss Account shall be recognized in Revenue / Profit and Loss Account.
4.5 In the case of Unit Linked Business, Mutual Fund units shall be valued at NAV.
STATEMENT OF INVESTMENT RECONCILIATION
The Authority intends to establish the reconciliation between the Purchase and Sale of Investments made during the Quarter with the FORM-3B filed for that Quarter. In this regard all Insurers shall file with the Authority, a Reconciliation Statement on Purchase and Sale of Investments on a Quarterly basis.
SUBMISSION DETAILS
The Reconciliation Statement on Purchase and Sale of Investments, as per FORM -5 and FORM - 5A, shall be submitted within 21 days from the end of the Quarter. In relation to the Quarter ending on the Balance Sheet date, the return shall be furnished based on Provisional figures and subsequently be resubmitted with Audited figures which shall be in addition to other Returns.
METHOD OF PREPARATION
The statement shall be prepared in line with the major heads of FORM-3A and FORM-3B as applicable to Life and General Insurers namely;
1. Central Government Securities
2. State Government and Other Guaranteed Securities
3. Housing and Loans to State Government for Housing and Fire Fighting Equipments
4. Infrastructure Investments
5. Social Sector Investments
6. Investment subject to Exposure Norms
7. Other than Approved Investments
Note: For all securities, falling under the above heads, the respective Category Code shall be provided as shown in Category of Investments. In the case of Mutual Fund Investments, the respective “Brand Name” of the Fund shall be shown apart from Category Code.
SECURITIES LISTING METHOD AND VALUATION METHOD
The Opening Balance of EACH security pertaining to each of the following, namely;
1. Central Government Investments
2. State Government and Other Guaranteed Securities
3. Housing and Loans to State Government for Housing and Fire Fighting Equipments
4. Infrastructure Investments
5. Social Sector Investments
6. Investment subject to Exposure Norms
shall be the consolidated entry, shown at the Carrying cost of that particular security or at the Actual Cost of Purchases less amortization.
In respect of Mutual Fund Investments, the Opening Balance shall be calculated as a product of the number of units held and the weighted average value of NAV of all purchase made upto that period for each of the Mutual Fund. The information relating to Purchase and Sale of Mutual Fund Units, for the Quarter, shall be the consolidated Weighted Average Cost of each Mutual Fund, and be drawn as per the FORM-5A
PURCHASES FOR THE QUARTER
All purchases made during the period shall be shown at the consolidated Weighted Average Value, SECURITY WISE, and be listed as per the “Category of Investments” under the Groups of FORM-3A / FORM-3B. The Book Value shall be the consolidated Weighted Average Value of each security purchased during the Quarter.
COST OF SALES
Cost of sales shall be the Weighted Average Cost of the investment
CLOSING BALANCE
The Closing Balance shall be the sum of Weighted Average Cost of Opening Balance and Purchases made during the period reduced by the Cost of Sales for that period, which shall be listed security wise. This shall be the investment that will be carried forward to the next period.
OTHER POINTS RELATING TO MF UNITS
All Insurers are directed to adhere to the Guidelines with respect to the Mutual Funds Valuation.