IRDAI Gives Insurers A Thumbs Up To Invest In InvITs And REITS

The Insurance Regulatory and Development Authority of India (IRDAI) is allowing insurers to invest in debt securities issued by infrastructure investment trusts (InvITs) and real estate investment trusts (REITS). This move makes sense as insurance companies are major players in ling term investments. This move will help in providing long-term funding to the portfolios held by the firms while providing financial stability to the realty sector.

The approval has come after IRDAI had allowed insurers to invest in the units of pooled investment vehicles, in March 2021. As per IRDAI, three-fourth of the insurers’ investments must be in AAA-rated assets, while the remaining one-fourth can go to AA or even A-rated instruments. Also, Instruments rated or downgraded below AA rating must be placed in the category of “other investments”. Also, an insurer can invest in an instrument below AA-rating, only after getting approval from the board. 

It is also noteworthy, that insurance companies generally stick to AAA-rated instruments like government securities (G-Sec).