Provide for investments in now downgraded IL&FS bonds: Irdai

New Delhi, March 11 (IANS) The Insurance Regulatory and Development Authority (Irdai) is examining the possibility of enforcing a directive on insurance companies to protect policy holders' funds stuck in the now downgraded bonds of IL&FS, but provisioning for such investments is a must, the Irdai chairman said on Monday.

Asked what Irdai will do to ensure that policy holders don't lose money, and if the regulator would enforce some rules in this regard, Irdai Chairman Subhash Chandra Khuntiasaid: "We will find some way to ensure that policy holders are protected."

He, however, did not give any details or assurance that this may actually call for any enforcement of regulations on insurance firms from the regulator's side.

Khuntia also said the insurers have to make provision for such investments gone sour.

"Either they (insurers) back it fully or they will have to provide for it. Some of the IL&FS companies may be better off ", Khuntia said on the sidelines of a Ficci health insurance event.

He said insurance companies must make provisions for their exposure to IL&FS.

Irdai rules mandate that insurance firms invest only in better rated companies and be watchful on rating changes.

Making provisions for investments is already a guideline for insurance companies which had been stressed after a lot of policyholders' fund got stuck in the now downgraded bonds of IL&FS.

Some of the listed companies of the now crippled IL&FS group were downgraded by ICRA and CARE Ratings to below investment grade following a string defaults since late August last year.

IL&FS defaulted on interest payments on many commercial papers in which mutual funds (MFs) and insurance firms had invested funds from the public.