IRDA sees no need to tighten insurance rules

NEW DELHI (Reuters) - India's insurance regulator sees no need to tighten regulations as private insurers in which foreign firms hold stakes were not impacted by the global financial turmoil, a senior official said on Friday.

Last week, the Insurance Regulatory and Development Authority (IRDA) started investigating if the Indian units of American International Group were affected by the crisis.

R. Kannan, a member of IRDA, said on Friday all the private insurers are "well-positioned" and maintaining an adequate solvency margin, which means assets were well above liabilities.

"There is no fear at all. There is no need to review the solvency margin," he told reporters after a business conference.

Indian insurance law requires insurers to maintain a solvency margin of 150 percent, and Kannan said, it was "very much adequate".

AIG has a 26 percent stakes in each of the two life and general insurance ventures with India's Tata group.

AIG last week agreed to a $85 billion federal bailout that will give the United States government 80 percent ownership, averting a possible collapse under mounting mortgage losses.

The regulator would give sufficient time to state-run Life Insurance Corp to bring down its equity exposure in some companies to 10 percent from 20 percent, as in some cases, Kannan said.

"It is an issue on which we are in touch with LIC and we may give them sufficient time. We don't want forced sale so that LIC offloads shares in the market and get lower returns on investment," Kannan said.