Strategy shift at India's top insurer LIC aids government borrowing costs
LIC), the country's largest insurer, has stepped up federal and state debt purchases to reduce capital volatility, according to sources and market participants, also helping lower government borrowing costs.
The shift, previously unreported, has helped states reduce costs by more than 40 basis points (bps) over the past 15 months.
«LIC has been increasing their investment into state debt,» confirmed a senior official from the state-run insurer, requesting anonymity as they were not authorised to speak to media.
LIC did not respond to an email sent by Reuters.
Continuous process
The shift began in fiscal 2023, not long after LIC went public.
LIC began shifting investments from its non-participating fund to debt from equity to reduce volatility in its solvency margin, said another person familiar with the matter, who also declined to be named.
Solvency margin, a key measure of capital, refers to the excess capital insurers maintain over claim amounts they may incur. This usually comes out of funds derived from non-participating policies.
The plan to shift is a «continuous process» and will be done gradually, they said, declining to specify to what level LIC intends to take its debt investments.
