New Delhi, Oct 15: Government may consider tax sops for the insurance companies setting aside funds as catastrophe reserve for covering natural calamities faced by the country every year, Finance Secretary D C Gupta indicated today. The Finance Ministry is also open to the idea of issuing longer-dated papers for enabling insurers to make long-term investments of over 30 years, Gupta said on the sidelines of a Ficci insurance conference here.
Insurance Regulatory and Development Authority Chairman, C S Rao, said it would be prudent for insurers to set aside 2.0 per cent of the premium income as catastrophe reserve and accumulate a significant amount over the years.
"However, in the absence of incentives to these funds in the form of tax exemptions, very little of paid premiums shall become available to meet future catastrophe claim liabilities. This is an area of concern and requires to be addressed," he said.
Gupta, however, did not commit that government would come up with tax sops but said "we will be definitely looking into it and put in place a facility to protect the insures from catastrophe risks."
Life Insurance Corporation Chairman S B Mathur asked government to restore the tax incentives on single premium policies as it was a preferred investment option for businessmen, sportsmen and small investors, who could not pay premiums over a long time. The Finance Secretary, however, did not respond to this request.
On long-term bonds, Gupta said "we already have 25-year government bonds. If necessary, we will come up with longer dated securities in consultation with RBI."
Bureau Report