Centre reportedly weighing 50-year bond issuance to support 'Insurance for All'

Insurance

Centre is likely to consider issuing ultra long, 50-year, on-tap bond issue during the next fiscal year, in order to deepen India's insurance coverage by providing more stable earnings to insurers, business daily Mint reported on February 27, citing people familiar with the matter.

The Finance Ministry is considering the proposal, and if implemented, the bonds are expected to help the government nudge the insurers towards the target of 'Insurance for All by 2047' with RBI's help, the news report added. Moneycontrol is yet to independently verify the development.

The Insurance for All initiative was a goal set by the India Insurance Regulatory and Development Authority (IRDAI) in 2022 to ensure that India's 1.4-billion population is fully insured by 2047.

Insurance companies invest the premiums collected from sold policies as well as their own reserves into long-dated bonds and equities. Bonds provide fixed interest income to insurers, helping them manage payouts for claim as well as other operational expenses.

As of now, a 40-year dated government security is the longest-duration bond sold by the government, as per RBI's website. By offering bonds with longer-maturity duration, Centre aims to provide insurers with predictable returns, essential to manage large policyholder obligations, the report added.

In Finance Ministry's assessment, longer-tenure bonds cater to the need for a secure, longer term vehicle 'to help insurers mitigate potential asset-liability mismatches', the report said, quoting a person familiar with the development. The proposed bond issuance could provide insurers with a 'stable, long-term investment avenue' as well as ease the need for regulatory capital, another source told the publication.

India  has a vast under-insured population, underserved due to challenges related to business or distribution. "While challenges in underwriting, distribution, and trust have left several subsectors underserved, these gaps create clear opportunities for innovation," Mayank Jain, Principal, Stellaris Venture Partners had earlier told Moneycontrol.

The Economic Survey 2024-25 had pitched for the Centre to pull all stops at wooing FDI, with Finance Minister Sitharaman announcing an increase of foreign direct investment (FDI) limit for insurance from 74 percent to 100 percent during the Union Budget 2025-26.

Earlier in January, TL Alamelu, Principal Advisor, International Financial Services Centres Authority (IFSCA) had feared that goal of achieving 'Insurance for All' by 2047 seems out of reach given the passive attitude of the industry.

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