In a significant change, insurers would be allowed to invest a portion of their shareholders’ funds in private limited companies. Such investments, however, will be capped at 5 per cent of the shareholders’ funds available beyond the solvency margin and will be permitted only in companies with a minimum net worth of Rs 25 crore and a track record of reported profits.
Hyderabad:In a major overhaul of the investment framework for insurers, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed a series of reforms including allowing repo transactions for life insurers, permitting Government Securities lending and opening a limited window for insurers to invest in companies or body corporates owned or controlled by their promoters.
The changes seek to provide insurers greater flexibility in managing their investment portfolios while maintaining prudent exposure limits and safeguards.
The insurance sector in India has undergone significant reforms pursuant to the enactment of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (“SBSR Act”). The IRDAI proposes IRDAI (Actuarial, Finance and Investment Functions of Insurer), (Second Amendment) Regulations, 2026, in light of the changes introduced through the SBSR Act, said the IRDAI.
Among the key proposals is the introduction of repo transactions for life insurers. The move is aimed at improving liquidity management by allowing insurers to borrow or lend funds against securities through repurchase agreements, a facility that has so far remained unavailable to life insurance companies.
IRDAI has also proposed permitting Government Securities lending, enabling insurers to earn additional income by lending surplus government securities and collecting lending fees. The measure is expected to improve the efficiency of portfolio management and provide insurers with an additional revenue stream without significantly increasing risk.
The revised framework also opens a limited window for insurers to invest in companies or body corporates owned or controlled by their promoters.
Under the proposal, an insurer may invest up to 5 per cent of its investment assets in a single promoter-owned entity.
However, the aggregate exposure to all companies belonging to the promoter group cannot exceed 5 per cent of the insurer’s investment assets, thereby placing safeguards against concentration risks and potential conflicts of interest.
In another significant change, insurers would be allowed to invest a portion of their shareholders’ funds in private limited companies. Such investments, however, will be capped at 5 per cent of the shareholders’ funds available beyond the solvency margin and will be permitted only in companies with a minimum net worth of Rs 25 crore and a track record of reported profits.
The proposed changes are aimed at modernising the investment regime for insurers, enhancing portfolio flexibility and creating additional avenues for returns, while ensuring that policyholder interests remain protected through carefully calibrated exposure limits and prudential norms.