REF: IRDA/F&I/CIR/INV/226/10/2022
OCTOBER 27, 2022
INVESTMENTS - MASTER CIRCULAR
IRDAI (INVESTMENT) REGULATIONS, 2016
[Image omitted. See the official document.]
Version - 03
October , 2022
The Authority, to enforce IRDAI (Investment) Regulations, had issued various Circulars and Guidelines at different times. This Master Circular covers all Circulars, Guidelines which are effective to date, to serve as one stand point reference. While due care had been taken to prepare this Master Circular, users may point out inconsistencies, through Life Insurance Council or General Insurance Council, which will be addressed in subsequent versions
INDEX
1. INVESTMENT CATEGORIES
- 1.1 Equity
- a. Investment in Equity Shares through IPO
- b. Limit for Investment in IPO
- c. Securities Lending and Borrowing (SLB) framework
- 1.2 Repo, Reverse Repo in Government Securities and Corporate Debt Securities
- 1.3 Mutual funds (incl. Exchange Traded Funds - ETFs)
- a. Investment in Equity Exchange Traded Funds
- b. Investment in GILT Exchange Traded Funds (GILT-ETF)
- c. Investment in Mutual Fund
- d. Investment in Debt ETFs with CPSE Bonds as underlying
- 1.4 Investment in Asset backed securities, PTCs and SRs
- 1.5 Investment in Alternative Investment Fund (AIF)
- 1.6 Debt Securities issued by Banks
- a. Investment in Perpetual Debt Instruments of Bank’s Tier-I Capital and Debt instruments of Upper Tier-II capital
- b. Bank’s Capital Instruments under Basel III – Investment by Insurance Companies
- c. Long term Bonds by Banks – Financing of Infrastructure and Affordable Housing
- d. Investment in “Additional Tier 1 (Basel III Compliant) Perpetual Bonds” [AT1 Bonds]
- 1.7 Other specific Bonds / Non-Convertible Debentures (NCDs)
- a. Investment 8.15% GIO FCI Special Bonds, 2002 & 8.03% GOI FCI Special Bonds, 2024
- b. Investment in Oil Companies GOI Special Bonds
- c. Investment in IIFCL Taxable Bonds – Approved Securities
- d. Investment in IIFCL Tax-Free Bonds – Approved Securities
- e. Investment in Indian Depository Receipts (IDR)
- f. Investment in Infrastructure Debt Fund – NBFC
- g. Investment in Infrastructure Debt Fund – Mutual Fund
- h. Investment in M/s L&T Infra Debt Fund – NBFC
- i. Investment in Onshore Rupee Bonds issued by Asian Development Bank (ADB) and International Finance Corporation (IFC)
- j. Investment in M/s India Infradebt Limited IDF– NBFC
- k. Investments in IDFC Infra Debt Fund Limited - NCD
- 1.8 Derivatives
- a. Exposure to Interest Rate Derivatives
- b. Exposure to Credit Default Swaps
- 1.9 Real Estate Investment Trusts (REIT) and Infrastructure Investment Trusts (InvIT)
- a. Investment in Units of “Real Estate Investment Trusts (REIT) & Infrastructure Investment Trusts (InvIT)”
- b. Investment in Debt Securities of “Real Estate Investment Trusts (REIT) & Infrastructure Investment Trusts (InvIT)”
- 1.10 Credit Rating- Applicable for Infrastructure Investments
- 1.11 Dividend Criteria for Equity Investment under “Approved Investment”
- 1.12 Exposure of Insurers to Banking, Financial and Insurance (BFSI) Activities
2. RISK MANAGEMENT AND CONCURRENT AUDIT
- 2.1 Investment Risk Management Systems and Process
- a) General
- b) Front Office
- c) Mid Office
- d) Back Office
- 2.2 Audit of Investment Risk Management Systems & Process, Internal / Concurrent Audit
- a. Audit of “Investment Risk Management Systems and Process”
- b. Internal / Concurrent Audit of Transactions
- c. Appointment of Audit Firms for “Investment Risk Management Systems & Process”
- d. Appointment of Audit Firm for Internal / Concurrent Audit of Transactions
- e. Information of Audit Firm for Internal / Concurrent Audit to be filed with IRDAI
- 2.3 Repo, Reverse Repo in Government Securities and Corporate Debt Securities
- 2.4 Investment in Equity Exchange Traded Funds
- 2.5 Exposure to Credit Default Swaps
- 2.6 Exposure to Interest Rate Derivatives
- 2.7 Investment in “Additional Tier 1 (Basel III Compliant) Perpetual Bonds” [AT1 Bonds]
- 2.8 Investment in Debt Securities of “Real Estate Investment Trusts (REIT) & Infrastructure Investment Trusts (InvIT)”
- 2.9 Control & Monitoring Mechanism of Investment Operations – Work from Remote Location
3. VALUATION GUIDELINES
- 3.1 Investment in Equity Exchange Traded Funds
- 3.2 Securities Lending and Borrowing (SLB) Framework
- 3.3 Investment in Mutual fund
- 3.4 Investment in Perpetual Debt Instruments of Bank’s Tier-I Capital and Debt Capital Instruments of upper Tier-II Capital
- 3.5 Investment in Onshore Rupee Bonds issued by Asian Development Bank (ADB) and International Finance Corporation (IFC)
- 3.6 Exposure to Interest Rate Derivatives
- 3.7 Income Recognition, Asset Classification, Provisioning and Other related matters
- a) Asset Classifications
- b) Provisioning for Loans and Advances
- c) COVID-19 – Rescheduling of Term Loans
- 3.8 Insurers Board to decide Primary / Secondary Exchange for valuation of Securities
4. OPERATIONAL PROCEDURE
- 4.1 Repo, Reverse Repo in Government Securities and Corporate Debt Securities
- 4.2 Securities Lending and Borrowing Framework
- 4.3 Investment in Equity Shares through IPO
- 4.4 Investment in Mutual Fund
- 4.5 Investment in Alternative Investment Fund
- 4.6 Exposure to Credit Default Swaps (CDS)
- 4.7 Outsourcing of Investment Function
- 4.8 Transfer of Investment
- 4.9 Other Investments in Pension and Group Fund
- 4.10 Transactions on Stock Markets to be on Cash Basis
- 4.11 Negotiated Dealing System – Order Matching (NDS – OM)
- 4.12 Reporting of OTC transactions in Certificates of Deposits (CDs) and Commercial Papers (CPs)
- 4.13 Issue of Long Term Bonds by Banks – Financing of Infrastructure and Affordable Housing
- 4.14 Reporting of transactions in Corporate Bonds, Commercial Papers, Certificate of Deposits & Securitised Debt
- 4.15 ULIP Fund Clearance procedure and NAV Process
- a. IRDAI ULIP Fund Clearance Procedure
- b. NAV Process
- 4.16 Implementing RFQ Platform for Investments in Corporate Bonds / Commercial Papers
- 4.17 Control & Monitoring Mechanism of Investment Operations – Work from Remote Location
5. DISCLOSURES AND REPORTING NORMS
- 5.1 Repo, Reverse Repo in Government Securities and Corporate Debt Securities
- 5.2 Securities Lending and Borrowing Framework
- 5.3 Investment in Credit Default Swaps
- 5.4 Exposure to Interest Rate derivatives
- 5.5 Issue of long term bonds by banks – Financing of Infrastructure and affordable housing
- 5.6 ULIP Periodical Disclosure
- 5.7 Exposure to Companies participating in Joint Lenders Forum (JLF)
6. FUND CLEARANCE FORMATS & INVESTMENT CATEGORY CODES
- 6.1 Asset Categories Sheet
- a. For Existing Segregated Funds – FORMAT 1
- b. For New Segregated Funds – FORMAT 2
- 6.2 Fund Clearance Declaration – FORMAT 3
- 6.3 Exhaustive Asset Categories as per IRDAI (Investment) Regulations, 2016
- a. Exhaustive List of Category Codes - Annexure – 1
- b. Valuation Methodology for Investment Categories - Annexure – 2
7. LIST OF CIRCULARS COVERED
8. LIST OF CIRCULARS DISCONTINUED
1. INVESTMENT CATEGORIES
1.1 EQUITY
a. Investment in Equity Shares through IPO[^1]
Equity shares offered through IPO, including Offer for Sale, which satisfy all the following criteria, shall be part of “Approved Investments”
- Equity Shares are being “listed” through IPO
- The Board of the insurer shall lay down the criteria to be considered before investing in IPOs.
- Performance track record of the company including Earnings and Dividend record, Dividend Criteria is satisfied for at least two past years as “unlisted” company as IRDAI (Investment) Regulations, in the case of Investee Companies, formed out of ‘de-merger’ of a parent company, issuing shares through IPO, the performance track record would apply with reference to the parent company
- The Investment in Equity Shares should comply with prudential and exposure norms as prescribed and in particular, Note 7 to Regulation 4 to 8 of IRDAI (Investment) Regulations, 2016 i.e., “actively traded” and “liquid instrument” conditions should be satisfied within 3 months from the date of listing
- Any investment made in IPOs, which do not satisfy the above conditions, shall fall under ‘Other Investments’
b. Limit for Investment in IPO
The maximum bid amount (and not Margin Money) to be invested in IPO shall be the least of the following:
- 10% of Subscribed Capital (Face Value) of the Investee Company (including the proposed Equity issue through IPO); or
- 10% of the ‘Fund’ (Fund shall refer to all Investments under management taken together) of a Life Insurance Company or 10% of the Investment Assets of a General Insurance Company, as the case may be.
