Irdai permits insurers to undertake transactions in bond forwards for hedging, ET BFSI

New Delhi, Regulator Irdai on Monday permitted insurance companies to undertake transactions in bond forwards as customers for hedging interest rate risks. The Reserve Financial institution has lately issued instructions specifying that any entity, eligible to be categorised as a non-retail consumer shall be eligible to undertake transactions in Forward Contracts in Government Securities (Bond Forwards) as a consumer.

In a round on ‘Publicity to Ahead Contracts in Authorities Securities (Bond Forwards)’, Insurance coverage Regulatory and Improvement Authority of India (Irdai) mentioned that in view of the RBI’s instructions and contemplating insurers requests for introduction of Bond Forwards, “insurers are hereby permitted …to undertake transactions in Bond Forwards as customers for hedging function”.

The Irdai has additionally imposed sure circumstances.

Insurers ought to undertake solely lengthy positions in Bond Forwards (shopping for Bond Forwards) and report such transactions on quarterly foundation.

Additionally, Bond Forwards aren’t permitted for ULIP enterprise, Irdai added.

As per the extant norms, insurers are allowed as customers with three forms of Rupee Curiosity Charge Derives to hedge the rate of interest threat.

These are: Ahead Charge Agreements (FRAs); Curiosity Charge Swaps (IRS) and Change Traded Curiosity Charge Futures (IRF).