Open for hedges

India’s insurance sector has long been hamstrung by its inability to use equity derivatives. This is about to change with the country’s insurance regulator set to relax the rules on derivatives. But are India’s insurers ready for synthetic instruments? Sarfraz Thind reports

Indian insurers have lagged some way behind their western counterparts in their ability to manage equity risk. Despite the existence of a relatively deep and well-functioning local equity derivatives market, current regulations prevent Indian insurers from using these products, a situation that has caused irritation to insurance companies that have expanded their equity exposure during the past few years.

The conservative regulatory stance is not wholly surprising given some of the negative