IRDAI Revises Rules for Private Company Investments and Infrastructure Funding

The Insurance Regulatory and Development Authority of India (IRDAI) has amended its investment regulations for insurers, allowing them to invest in private limited companies and debt issued by infrastructure Special Purpose Vehicles (SPVs), as per The Economic Times news report.  

The regulator has also permitted repo transactions, reverse repo in corporate debt securities and government securities lending, while introducing limits and reporting requirements for these investments. 

Private Firms Brought Under Investment Basket 

For the first time, insurers can invest in equity and debt instruments issued by private limited companies under the 'other investments' category.  

Life insurers may invest up to 3% of their life or segregated funds, while general insurers can allocate up to 5% of their investment assets across private limited companies, Alternative Investment Funds (AIFs) and Venture Funds (VFs). 

The eligible company must have a minimum net worth of ₹25 crore and should have reported profits in at least two of the last three financial years. Investments in private companies that belong to an insurer's promoter group have not been allowed. 

Conditions for Infrastructure Investments 

The revised regulations also permit insurers to invest in debt issued by infrastructure SPVs created for projects such as roads, ports, and power plants.  

Investments will be restricted to 20% of the debt issued by an SPV or the applicable investment limit under existing regulations, whichever is lower. 

Only projects that are operational and generating stable cash flows will qualify. The funds raised must be used only to refinance existing debt, and the securities should carry a minimum AA credit rating.  

SPVs will be required to disclose quarterly cash flows, while insurers must provide investment-related details in their financial statements. 

Exposure Limits and Liquidity Norms 

IRDAI has retained a ceiling of 5% of investment assets for exposure to a single promoter group company. The combined exposure across all promoter group companies has also been capped at 5%.  

Investments through private placements or unlisted securities remain restricted, except in specified cases such as qualified institutional placements of BSE100 and NSE100 companies. 

The regulator has also permitted repo transactions and government securities lending. Combined exposure has been capped at 25% of eligible government securities after meeting statutory requirements or ₹10,000 crore, whichever is lower, in line with RBI guidelines.  

Reverse repo transactions in corporate debt securities have also been allowed, with a 10% limit for life, general, health and reinsurance companies. No limit has been prescribed for reverse repo transactions involving government securities. 

Read More: RBI Permits Banks to Offer Differential Bulk Deposit Rates Based on LCR Run-Off Rates! 

Conclusion 

IRDAI's revised investment norms cover private companies, infrastructure SPVs, and liquidity management transactions. The framework also sets conditions for investment limits, reporting, and credit quality. 

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