IRDAI’s regulatory proposal around InvITs expected to boost insurer infra investments

Written by Adam Cadle

20/10/2020

The Insurance Regulatory Development Authority of India (IRDAI) proposal to amend the regulations around investments in infrastructure investment trusts (InvITs) is expected to open an alternate source of investments for Indian insurers, according to GlobalData.

Insurers’ investments in a single InvIT are presently capped at 5% and limited to listed equity securities. The proposed changes in regulations are expected to increase the cap for insurers and enable them to invest in debt securities issued by InvITs.

According to GlobalData’s Insurance Database, the total investment income of Indian insurers is expected to decline by -2.7% in 2020 as compared to the 6.2% growth registered in 2019, primarily due to the highly volatile equity markets and uncertain market conditions due to COVID-19. Infrastructure projects have been the preferred mode of investment for Indian insurers. According to the Life Insurance Corporation of India, the infrastructure investments for the total life insurance industry valued at INR3.84trn ($O.052trn), as of 31 March 2019, as compared to INR3.76trn ($0.051trn) during the same period the previous year.

The additional investment options in debt instruments are expected to yield more stable returns and a well-diversified portfolio to insurers and pension funds as compared to equity investments. In addition, the increasing demand for housing and infrastructure projects make InvITs an alternatively attractive proposition for Insurers, GlobalData said.

Related Articles