Irdai allows insurers to invest in debt instruments of InvITS and REITS

Securities should not be rated below 'AA' under the "approved investment" category. In case the instrument is subsequently downgraded, it will be part of "other investments"

The insurance regulator on Thursday allowed insurance companies to invest in debt securities of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). Earlier, insurance companies were only allowed to in units of InvITs and REITs. 

This decision has been taken by the Insurance Regulatory and Development Authority of India (Irdai) post the passage of the Finance Bill, which had proposed permitting trusts to issue debt securities. 

The regulator has said, insurers can invest in debt securities of InvITs and REITs that are rated not less than “AA” under the “approved investment” category. In the event of a subsequent downgrade, the instrument will become part of their “other investments”. 

It has also specified that the cumulative investment of insurance companies in units and debt instruments of InvITs and REITs cannot exceed 3 per cent of their total fund size at any point in time. 

“No insurer shall invest more than 10 per cent of the outstanding debt instruments (including the current issue) in a single InvIT/REITs issue”, the Irdai said. 

Also, if the sponsor of the InvITs and REIT is also the promoter of an insurance company then that company cannot invest in the debt instruments of such InvITs and REITs. 

The regulator has also instructed that investment by insurers in the debt instruments of InvIT will be classified as “Infrastructure Investment” while investment in debt instruments of REITs will form part of industry group 'Real Estate Activities" under NIC industry classification.

Also, the investment in debt securities of InvITs or REITs has to be valued either as per Fixed Income Money Market and Derivatives Association of India (FIMMDA) or at applicable market yield rates published by any rating agency registered with the Securities and Exchange Board of India (Sebi), the insurance regulator said.