Government sources say that Union Finance Minister P. Chidambaram is eager to raise the foreign direct investment (FDI) cap in the insurance sector from existing 26 per cent to 49 per cent.

On Wednesday, Mr. Chidambaram met Insurance Regulatory & Development Authority (IRDA) chairman J Harinarayan and discussed possible measures to revive the insurance sector.

Among other things, they discussed plans to relax investment norms for life insurers. Relaxation of investment norms will allow insurers to invest funds in the infrastructure sector.

Presently, the investment norms for insurers do not let them to invest money in a number of sectors including infrastructure as these insurance companies are not AAA rated.

Speaking on the topic, the chief investment officer of a private-sector insurance firm said, "Any relaxation on this front will allow the companies to invest in A+ and `A' rated securities. This will give some more room for insurers to generate investment income."

In May this year, the government tried to raise the FDI limit in the insurance sector but opposition from the side coalition partners forced it to postpone the decision.