The Insurance Regulatory and Development Authority (IRDA) has permitted insurance companies to invest in debt securities issued by any pooled investment vehicle, including infrastructure and real estate investment trusts, in order to increase funds available for infrastructure investment.
The Insurance Regulatory and Development Authority of India (Irdai) made this decision following the passage of the Bill, which proposed allowing trusts to issue debt securities.
Under the "authorised investment" category, insurers can invest in debt securities of InvITs and REITs that are classified at least "AA," according to the regulator. If the instrument is downgraded in the future, it will be added to their "other investments.".
"No insurer shall invest more than 10% of the outstanding debt instruments (including the current issue) in a single InvIT/REITs issue", the Irdai said. At no time shall the combined Investments in Units and Debt Instruments of InvITs and REITs surpass 3% of the Insurer's overall fund size, added further.
The insurance regulator also stated that debt securities held by InvITs or REITs must be rated either according to the Fixed Income Money Market and Derivatives Association of India (FIMMDA) or at relevant market yield rates reported by any rating agency registered with the Securities and Exchange Board of India (Sebi).