IRDA to permit insurers to trade in equity futures:

Average daily turnover on the National Stock Exchange's derivatives segment is roughly 1.13 lakh crore in 2010-11, as against 72,000 crore in 2009-10

Insurance Regulatory and Development Authority (IRDA) plans to permit insurers to trade in equity futures and options contracts to help the companies protect returns from equity-linked products against sharp stock market declines. A senior IRDA official was quoted as saying, "The rules will be shaped to allow insurers to use equity derivatives for hedging risks only and not for speculating. The proposal, currently being vetted, will be evaluated by Irda's internal committee on investments soon. Initially, only unit-linked insurance products, or Ulips, which form over 60% of the local insurance industry's total assets under management of 14.7 lakh crore, will be allowed to trade in equity futures and options. The entire corpus of Ulips can be invested in stocks depending on the mandate''. Sashi Krishnan, chief investment officer, Bajaj Allianz Life Insurance reportedly said ''Since we manage a large portfolio, equity hedging will help reduce the risk when there is a downside". Average daily turnover on the National Stock Exchange's derivatives segment is roughly 1.13 lakh crore in 2010-11, as against 72,000 crore in 2009-10. Leading brokers, whose derivatives business have been impacted after Sebi barred mutual funds from selling options, have been nudging insurance companies to push IRDA to allow them to participate in the equity derivatives market, according to reports.