Investments Master Circular -IRDAI (INVESTMENT) REGULATIONS, 2016

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REF: IRDA/F&I/CIR/INV/226/10/2022 OCTOBER 27, 2022 INVESTMENTS - MASTER CIRCULAR IRDAI (INVESTMENT) REGULATIONS, 2016 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 Investment – Master Circular Page 2 of 100 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)” Investment – Master Circular Page 3 of 100 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 Investment – Master Circular Page 4 of 100 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 Investment – Master Circular Page 5 of 100 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 Investment – Master Circular Page 6 of 100 1. INVESTMENT CATEGORIES 1.1 EQUITY a. Investment in Equity Shares through IPO1 Equity shares offered through IPO, including Offer for Sale, which satisfy all the following criteria, shall be part of “Approved Investments” 1. Equity Shares are being “listed” through IPO 2. The Board of the insurer shall lay down the criteria to be considered before investing in IPOs. 3. 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 4. 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 5. 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: 1. 10% of Subscribed Capital (Face Value) of the Investee Company (including the proposed Equity issue through IPO); or 2. 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. c. Securities Lending and Borrowing (SLB) framework2 Insurers are permitted to participate in Securities Lending and Borrowing (SLB) scheme subject to the following 1. The SLB Framework should be governed by the SEBI Cir no. MRD/DoP/SE/Dep/Cir – 14/2007 Dt. 20th Dec, 2007 as amended from time to time. Insurers are permitted to lend through SLB Framework in Equities ONLY 2. The Insurer has to adhere to the Client level and Participant level position limits prescribed by SEBI and stock exchange while undertaking SLB. Insurer can only lend securities to the extent of not more than 10% quantity of those “scrips” of that particular fund(s). These prescribed limits shall be adhered at the time of lending 1IRDA /CIR/INV/020/2008-09 Dt. 22nd Aug 2008 2IRDA/F&I/CIR/INV/134/2013 Dt. 12th July 2013 Investment – Master Circular Page 7 of 100 3. Securities lent in SLB would not be treated as creating encumbrance, charge, hypothecation or lien on such securities 1.2 REPO, REVERSE REPO IN GOVERNMENT SECURITIES AND CORPORATE DEBT SECURITIES Insurers can undertake Repo/Reverse Repo transactions in Government Securities and Corporate Debt Securities subject to the provisions of Insurance Act, 1938 and the following conditions: 1. In case of Life Insurers, the exposure to reverse repo transactions in Corporate Debt Securities at any point of time shall not exceed 10% of all funds taken together. Further, at individual Segregated Fund level [SFIN], the exposure should not exceed 10% of such fund size [SFIN]. Life Insurers cannot participate in repo transactions. 2. In case of Non-Life Insurers, the exposure to Reverse Repo and Repo transactions in both Government Securities as well as Corporate Bond Securities (taken together) shall not exceed 10% of Investment Assets of the Insurer. 3. Reverse Repo transaction in Govt. Securities will be treated at par with CBLO transactions and the 10% Investment limit, mentioned in points 1 and 2 above, shall not apply to Reverse Repo transaction in Govt. Securities. 4. The underlying corporate debt security in case of Reverse Repo shall be listed and shall have a rating of not less than AA or equivalent. 5. The tenor of Repo transactions shall not exceed a period of six months. While entering into such repo transaction, prior approval of the Investment Committee is mandatory. 6. No Reverse Repo/Repo transactions in Corporate Debt Securities shall be made between the Insurer and entities belonging to its promoter group. 7. The Securities held as collateral in a Reverse Repo, shall not form part of exposure calculations under Regulation 9 of IRDAI (Investment) Regulation, 2016. In Reverse Repo transaction, the exposure shall be on the counterparty. 8. At any point of time these transactions shall be in compliance with Regulation 4, 5, 6, 7 and 8 of the IRDAI (Investment) Regulation, 2016 as amended from time to time and comply with other Guidelines, Circulars issued there under. 1.3 MUTUAL FUNDS (INCL. EXCHANGE TRADED FUNDS - ETFs) a. Investment in Equity Exchange Traded Funds3 Insurers can invest in Equity ETFs, as a part of Mutual Fund exposure, subject to the following conditions: 3IRDA/F&I/CIR/INV/074/03/2014 Dt. 03rd Mar, 2014 Investment – Master Circular Page 8 of 100 1. Only passively managed schemes of the Mutual Funds which are registered with SEBI and governed by SEBI (Mutual Funds) Regulations, 1996, as amended from time to time are eligible. These schemes should be benchmarked and be tracked based on a publicly available Index 2. The total expense ratio shall not exceed 0.50% 3. At least 85% securities in the equity basket shall be compliant with respect to dividend distribution norms as per Regulation 3 (A)(5) of IRDAI (Investment) ,2016 to qualify as a part of “Approved Investment”.4 4. Insurers are required to ensure compliance with the provisions of Sec. 27E of the Insurance Act, 1938 and shall invest only in ETFs which invest in domestic equities 5. These instruments shall be listed on at least one Stock Exchange which has nationwide connectivity terminals 6. In case, the dividend criteria mentioned under point no. 3 is not met by the ETF, such investment shall be automatically re-classified as ‘Other Investment’ category 7. These Investments shall be governed by the exposure norms applicable for Investment in Mutual Funds by Insurers 8. Exposure to stocks through ETF shall not be reckoned for the overall exposure norms prescribed for Individual stocks vide Regulation 9 of IRDAI(Investment) Regulations, 2016 as amended from time to time b. Investment in GILT Exchange Traded Funds (GILT-ETF) 5 Insurers can invest GILT-ETFs as part of “Approved Investments” which fulfil all the conditions prescribed for investment in Mutual Funds under Gilt/G Sec./Liquid categories and as a part of Mutual Fund exposure 1. The GILT-ETFs shall be issued and managed by the Mutual Funds registered under SEBI (Mutual Funds) Regulations, 1996, as amended from time to time 2. The object of the GILT-ETFs shall be to invest in a basket of Govt. Securities Actively Traded in the market or constituents of a publicly available index 3. The minimum investment by the Insurer shall not be less than Creation Unit Size and shall not be reduced, at any time below Creation Unit Size and value of Creation Unit Size. Such investment at the time of investment, shall not be more than Rs.50 lakhs 4. The Overall Expense Ratio shall not exceed 0.50% 5. Insurers are required to ensure compliance with the provisions of Sec. 27E of the Insurance Act, 1938 and shall ensure that the GILT-ETFs invest only in Domestic Govt. Securities 6. The GILT-ETFs shall be treated at par with GILT/G-SEC Mutual funds and shall adhere to exposure norms applicable to “Investment in Mutual Funds (MFs) by Insurers”. 4 IRDAI/F&I/CIR/INV/165/8/2022 Dt.03rd Aug, 2022 5IRDA/F&I/CIR/INV/156/08/2015 Dt. 28th Aug, 2015 Investment – Master Circular Page 9 of 100 c. Investment in Mutual Funds6 1. Investment in Gilt, G Sec and Liquid Mutual Funds would form part of ‘Approved Investments’ under IRDAI (Investment) Regulations, 2016 as per guidelines listed below. Hence any Investment made in Debt and Income Mutual Funds, including those which partly invest in Government Securities and Money Market instruments, will fall under ‘Other Investments’, which in turn shall be subject to the limits prescribed in the guidelines issued under IRDAI (Investment) Regulations, 2016, as amended from time to time, along with the norms mentioned below. 2. The investment shall be restricted to schemes of Mutual Funds comprising of Liquid Funds, Gilt, G Sec or Debt and the same shall be governed by the following norms: a) The Mutual Fund should be registered with SEBI and be governed by SEBI (Mutual Funds) Regulations, 1996 b) Gilt / G Sec / Liquid MFs shall have the same meaning as under SEBI Regulations c) The insurer shall, as a part of Investment Policy, cover the required diversification among various Mutual Funds to minimize risk 3. Where, the schemes of mutual funds in which investment is made, is managed by an Investment Manager who is under the direct or indirect management or control of the Insurer or its promoter, the same shall not exceed, in the case of Life Insurer, 3% of Life Fund, Pension, Annuity & Group Funds and 5% of Unit Linked Fund and in the case of General Insurers, not more than 5% of Investment Assets 4. The investment in Gilt / G Sec / Liquid /Debt/ Income Mutual Funds (all taken together) at any point of time, shall be as under: “Investment Assets” as per Regulation 2(i) of IRDAI (Investment) Regulations, 2016 Percentage to Investment Assets Less than Rs.50,000 Cr 10% More than Rs.50000 Crores and Less than Rs.250000 Crores 7% More than Rs.250000 Crores 5% 7 5. The above limits in the case of Life Insures, will apply to the overall level and at SFIN Level, the maximum exposure shall not exceed 15%. 6. At any point of time, investment in any single Mutual Fund shall not exceed 20% of the total investments in Mutual Funds (all taken together). 6IRDA/CIR/INV/020/2008-09 Dt 22nd Aug 2008 7 IRDAI/F&I/CIR/INV165/8/2022 Dt.3rd August, 2022 Investment – Master Circular Page 10 of 100 d. Investment in Debt ETFs with CPSE Bonds as underlying8 Debt ETFs with underlying Debt Securities of Central Public Sector Enterprises (CPSEs) [herein after referred to as Debt ETFs] are eligible class of Investment, and as a part of “Mutual Fund” exposure. All Exposure and Prudential Norms applicable for investments in Mutual Funds covered under Para 1.3 of this Master Circular shall apply for investment made in Debt ETFs, in addition to the following conditions: 1. The Debt ETFs shall be issued by Mutual Funds registered with SEBI and governed by SEBI (Mutual Funds) Regulations, 1996, as amended from time to time. 2. The Debt ETF shall invest in a basket of Securities issued by CPSEs which are part of constituents of a publicly available index. 3. The minimum investment by the Insurer shall not be less than Creation Unit size and it shall not be reduced to below Creation Unit Size. 4. “All” Securities in the Index shall be complied with rating criteria as per Regulation 3 of IRDAI (Investment) Regulations, 2016 for it to part of “Approved Investment”. If any of the underlying securities gets downgraded below “AA”, the Debt ETF shall be automatically reclassified under “Other Investment”. 1.4 INVESTMENT IN ASSET BACKED SECURITIES (ABS), PASS THROUGH CERTIFICATES (PTCs) AND SECURITY RECEIPTS (SRs) 1. Insurers are permitted to invest in Asset Backed Securities (ABS) / Pass Through Certificates (PTCs) with underlying Housing and / or Infrastructure assets [as defined under Regulation 2(h) of IRDAI (Investment) Regulations, 2016, as amended from time to time]. 2. Investment in Asset Backed Securities (ABS) / Pass Through Certificates (PTCs) / Security Receipts (SRs) with underlying Housing and / or Infrastructure Assets, shall form part of “Approved Investments”, subject to following exposure and prudential norms: a) ABS / PTC /SR must be rated not less than AAA or equivalent by a Credit Rating Agency, registered under SEBI (Credit Rating Agencies) Regulations, 1999 b) The investment in ABS / PTC / SR with underlying Housing and / or Infrastructure assets shall at ‘all times’ not exceed 10% of respective fund(s) in the case of Life Insurers and not more than 5% of Investment Assets in the case of General Insurers 3. If the ABS / PTC / SR with underlying Housing and / or Infrastructure assets are downgraded below AAA such investment shall be automatically be re-classified as “Other Investments”. 4. In case the cash-flows from such instrument are not received on due dates, the investment in such assets shall be automatically be re-classified as “Other Investments” from such date for reporting in FORM 3A (Part A) / FORM 3B of IRDAI (Investment) Regulations, 2016 8 IRDA/F&I/CIR/INV/222/12/2019 Dt11th Dec,2019 Investment – Master Circular Page 11 of 100 5. The investments in securitized assets, both under Approved and Other Investments, taken together shall not exceed 10% of respective fund size in the case of Life Insurers and not more than 5% of Investment Assets in the case of General Insurers. 6. The Insurer, as a part of risk management, shall split the investment in ABS, PTCs and SRs over different issuers and tenures 7. All guidelines of Classification, Income Recognition and Valuation of Assets issued by the Authority shall be applicable to these investments. 1.5 INVESTMENT IN ALTERNATIVE INVESTMENT FUND (AIF)9 1. Investments in Category I and II AIF (within SEBI Regulations) are permitted as a part of “Other Investments”. Insurers are permitted to invest in Category I AIFs which is an Infrastructure Fund, SME Fund, Venture Capital Fund and Social Venture Fund as defined in SEBI AIF Regulations. Insurers are permitted to invest in a Category II AIFs which invests a minimum of 51% of the funds in the Infrastructure entities or SME entities or Venture Capital undertakings or Social Venture entities in aggregate. 2. All restrictions under Insurance Act, 1938 and IRDAI Investment (Regulations) 2016 regarding investing of funds outside India, promoter group, combined exposure limits in venture capital funds and AIFs under the Other than Approved category of investments will continue to apply. 3. Insurers are not permitted to invest in in AIFs where rights attached to units are varied. 4. (a) No investment is permitted into AIFs which undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted under SEBI (Alternative Investment Funds) Regulations, 2012. (b) Insurer shall invest only into Fund of Funds (FoF) which comply requirement of Section 27E of the Insurance Act, 1938. (c) Insurer shall ensure compliance with Section 27E by a clause in the Fund Offer Documents executed by FoF to restrain such FoF investing into AIFs which invest in overseas companies/funds. (d) No Insurer shall invest in an AIF, which in turn has exposure to a FoF, in which the Insurer has taken an exposure. (e) The Insurer on a quarterly basis, obtain a certificate issued by the Concurrent Auditor on the compliance of the above conditions and file the same along with quarterly periodical returns.10 5. Insurers should ensure that AIFs do not invest in securities of companies incorporated outside India to comply with the provisions of Section 27E of the Insurance Act, 1938 6. The sponsor of such Alternative Investment Fund should not be from the promoter group of the Insurer. The Fund shall not be managed by an Investment Manager who is either directly or indirectly controlled or managed by the Insurer or its promoters 9IRDA/CIR/INV/020/2008-09 Dt. 22nd Aug 2008, IRDA/F&I/Cir/INV/203/2011 Dt. 30th Aug, 2011, IRDA/F&I/INV/CIR/054/03/2013 Dt. Mar, 2013, IRDA/F&I/INV/CIR/172/08/2013 Dt. 23rd Aug, 2013 10 IRDAI/F&I/CIR/INV/074 Dt Apr 2021 Investment – Master Circular Page 12 of 100 7. The investments in Category I AIF shall be shown under category code ‘OAFA’ and Category II AIF shall be shown under category code ‘OAFB’ 8. Investment in the AIF and investments in Venture Funds shall be subject to the following exposure norms: Type of Insurer Overall Exposure to VFs &AIFs (all taken together) Exposure to single AIF/Venture Fund (a) (b) (c) Life Insurer 3% of respective Fund 10% of AIF /VF size or 20% of Overall Exposure as per (b), whichever is lower. The above ‘10%’Limit shall be read as ‘20%’ in case of Infrastructure Fund General Insurer 5% of Investment Assets 10% of AIF /VF size or 20% of Overall Exposure as per (b), whichever is lower. The above ‘10%’ Limit shall be read as ‘20%’ in case of Infrastructure Fund 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 Capital11 The Reserve Bank of India [vide Master Circular DBOD.No.BP.BC.57/21.01.002/2005-2006 Dt. 25th Jan, 2006] has allowed banks to raise Capital through issue of Hybrid Instruments as under for augmenting Capital Adequacy Norms: a. Innovative Perpetual Debt Instruments for inclusion as Tier 1 Capital b. Debt Capital Instruments eligible for inclusion as Upper Tier 2 Capital c. Perpetual Non-Cumulative Preference Shares for inclusion as Tier 1 Capital; and d. Redeemable Cumulative Preference Shares eligible for inclusion as Tier 2 Capital The above Instruments shall be part of ‘Approved Investments’ under IRDAI (Investment) Regulations, 2016, subject to the following conditions: 11IRDA/CIR/INV/020/2008-09 Dt. 22nd Aug 2008 Investment – Master Circular Page 13 of 100 1. The Debt Instrument issued by Banks in Private Sector shall be rated not less than ‘AAA’ and those issued by Banks in Public Sector shall have rating not less than ‘AA’ by an independent Rating Agency, registered under SEBI 2. Preference shares issued by the Banks shall satisfy the conditions specified under Regulation 3 (a) of IRDAI (Investment) Regulations, 2016 3. All Exposure norms as specified in Regulation 9 of IRDAI (Investment) Regulations, 2016 shall apply to these Hybrid Debt Instruments / Preference Shares Issued by the Banks 4. Where the Hybrid Debt Instrument is downgraded below ‘AAA’, in the case of Private Sector banks and (below AA in the case of Public Sector Banks) such investments shall be re-classified as ‘Other Investments’ and reported in FORM 2 of IRDAI (Investment) Regulations, 2016 5. In case the Interest on the Instrument is not serviced on due dates, the Investment in such Hybrid instruments shall be automatically re-classified as ‘Other Investments’ from such date and reported in FORM 3A (Part A) or FORM 3B (Part A) of IRDAI (Investment) Regulations, 2016 in respect of Life and General Insurers respectively 6. All guidelines for Classification, Income Recognition and Valuation of Assets issued by RBI shall be applicable for these Investments. b. Bank’s Capital Instruments under Basel III – Investment by Insurance Companies12 Insurers can invest in the following instruments, issued by Domestic Banks as Tier II Capital, prescribed under Basel III framework, as part of ‘Approved Investments’ under IRDAI (Investment) Regulations, 2016, subject to conditions mentioned below: a. Debt Capital Instruments (DCI) b. Redeemable Non-Cumulative Preference Shares (RNCPS) c. Redeemable Cumulative Preference Shares (RCPS) 1. The Debt Instruments issued by Banks shall be rated not less than ‘AA’ by an independent Rating Agency, registered under SEBI 2. Where the Instruments are downgraded below ‘AA’, such investments shall be automatically re-classified as ‘Other Investments’ 3. Preference shares issued by the Banks shall satisfy the conditions prescribed in Regulation 3(a)(5) of IRDAI (Investment) Regulations,2016 4. In case the Interest on the Instrument is not serviced on due date, the Investment in such instruments shall be automatically re-classified as ‘Other Investments’ from such date of reporting to the Authority 5. All Exposure norms prescribed in Regulation 9 of IRDAI (Investment) Regulations, 2016 shall apply to these Instruments/Preference Shares Issued by Banks 6. Investments in these instruments shall be classified under ‘Financial and Insurance Activities’ sector (BFSI) 12IRDA/F&I/CIR/INV/063/02/2014 Dt. 13th Feb 2014 Investment – Master Circular Page 14 of 100 c. Long Term Bonds by Banks – Financing of Infrastructure and Affordable Housing13 Investment in Long Term Bonds issued by Banks, for financing “Infrastructure and Affordable Housing” shall be reckoned for Insurers mandatory investment in ‘Infrastructure & Housing sector’ subject to the following conditions: 1. All Exposure norms i.e. Single Investee, Group and Industry exposures etc. as specified in Regulation 9 of IRDAI (Investment) Regulations, 2016 shall continue to apply 2. Minimum rating requirements to qualify as ‘Approved Investment’ shall be as per extant Investment Regulations d. Investment in “Additional Tier 1 (Basel III Compliant) Perpetual Bonds” [AT1 Bonds] Insurers can invest in Additional Tier 1 (Basel III Compliant) Perpetual Bonds [AT1 Bonds], which confirm to the following: 1. The rating of AT1 Bonds shall be not less than “AA”, at the time of investment 2. The Offer document, in the case of IPOs of AT1 Bonds, shall have a provision for listing in at least one of the Exchanges 3. The aggregate value of AT1 Bonds held in a particular Bank, at any point of time, shall not exceed 10% of the total outstanding AT1 Bonds, of that particular Bank. 4. The Common Equity Tier I Capital (CET) including Capital Conservation Buffer, of the issuer Bank shall be more than 9.0% at the time of investment in AT1 Bonds of such Bank. 5. a. The issuer bank should not have cancelled/deferred any coupon payment on its debt instruments including AT1 bonds in the preceding three financial years. b. The issuer bank shall have reported net profit after tax for the preceding two years and having a positive accumulated profit as per the latest audited balance sheet. c. The issuer bank has not reported any divergence in the asset classification and provisioning, identified by RBI, in its latest audited balance sheet.14 6. The AT1 Bonds shall be forming part of “Equity” in complying with IRDAI (Investment) Regulations, and Master Circular issued thereunder 7. No investment shall be done in AT1 Bonds, where the issuer Bank is either under the Promoter Group of Insurer or Corporate Agent of the Insurer 13IRDA/F&I/CIR/INV/213/09/2014 Dt. 12th Sep 2014 14 IRDAI/FI/CIR/INV/165/8/2022 Dt.3rd August 2022 Investment – Master Circular Page 15 of 100 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 As these “Special Bonds” meet the requirement of “Approved Securities” as defined in Section 2(3) (i) of Insurance Act 1938, Insurers can invest in such “Special Bonds” and they shall be classified under “Other Approved Securities” for the purpose of pattern of Investments b. Investment in Oil Companies GOI Special Bonds 1. Insurers investment into the following ‘GOI Special Bonds’ shall form part of ‘Other Approved Securities’, for pattern of Investments, as prescribed under IRDAI (Investment) Regulations, 2016:  8.01% Oil Companies GOI Special Bonds, 2023 (announced vide RBI Press release Dt. 15th Dec, 2006) c. Investment in IIFCL Taxable Bonds – Approved Securities15 1. India Infrastructure Finance Company Limited has issued Taxable Bonds amounting to ` 2,100 Crores as mentioned below: No. Date Bond Amount (Rs. Crore) Date of Maturity 1 18-12-2007 8.82%IIFCL2022 200.00 18-12-2022 2 17-11-2008 9.35%IIFCL2023 200.00 17-11-2023 3 18-12-2008 8.68%IIFCL2023 200.00 18-12-2023 4 08-04-2009 8.10%IIFCL2024 500.00 08-04-2024 5 28-04-2009 7.90%IIFCL2.24 500.00 28-04-2024 2. As the repayment of principal and interest of the above Bond (vide File No: 18/04/2009/IF-1 Dt. 27th July 2009) are guaranteed by Government of India, which fulfils the requirements of “Approved Securities” under Section 2 of Insurance Act, 1938 subscription to these bonds will not be subject to Regulation 9 of IRDAI (Investment) Regulations, 2016as amended from time to time. 3. Also, the above bonds shall form part of “Infrastructure Investment” for the purpose of pattern of investment under IRDAI (Investment) Regulations, 2016 15IRDA/F&I/CIR/INV/036/09/2009 Dt 17th Sep 2009 Investment – Master Circular Page 16 of 100 d. Investment in IIFCL Tax free Bonds – Approved Securities16 1. Tax Free Bonds issued by India Infrastructure Finance Company Limited (IIFCL)for Rs 1000 Crores, with unconditional and irrecoverable guarantee covering repayment of principal and interest by Government of India (vide file no. 18/24/Jan2008/IF-1 Dt. 15th, 2009) shall be part of ‘Approved Securities’ as defined under Section 2 of Insurance act, 1938. 2. The above Bonds will not be subject to any exposure norms specified under IRDAI (Investment) Regulations, 2016 as amended from time to time. Further, investments in the said bonds, will qualify for mandatory ‘Infrastructure Investments’ e. Investment in Indian Depository Receipts (IDR)17 Investment in IDR by any insurer would amount to an indirect investment made outside the country and would not be in compliance with Section 27 of Insurance Act, 1938 (Prohibition for investment of funds outside India) that restricts the investment of policyholders’ funds directly or indirectly outside the country f. Investment in Infrastructure Debt Fund - NBFC18 1. Investment in Infrastructure Debt Fund, backed by Central Government as approved by the Authority, on a case to case basis shall be reckoned for“ investments in infrastructure” 2. Investment in Rs.500 Crores Non- Convertible Debentures of M/s India Infradebt Ltd will form part of Investments in Infra Sector by the Insurers 3. The exposure limits and Industrial classification of such investment will be as per Note 3 to Regulation 9 of IRDA (Investment) Regulations, 2016and Circulars issued there under g. Investment in Infrastructure Debt Fund – Mutual Fund 19 1. Investment in Infrastructure Debt Fund (IDF), backed by Central Government, on a case to case basis shall be, approved by the Authority, to reckon for “investments in infrastructure” 2. Insurers investment in Asset Management Companies – IDF Mutual Fund Schemes, approved by IRDAI, shall be reckoned as part of “investment in Infrastructure” 3. Insurers investment in the following IDF-MF shall be reckoned as investment in Infrastructure sector subject to the following: a. Such investments shall be categorized as ‘other investments’ b. Insurer can invest up to 20% of the Assets Under Management (AUM) of the Schemes referred c. Such Investments are subject to overall exposure limits and other conditions applicable to Mutual Funds 16IRDA/INV/CIR/036/2008-09 Dt 06th Feb 2009 17IRDA/INV/CIR/015/June 09 Dt 04th June 2009 18IRDA/INV/CIR/193/09/2013 Dt 26th Sep 2013 19IRDA/INV/CIR/194/09/2013 Dt 26th Sep 2013 Investment – Master Circular Page 17 of 100 No Name of the AMC Name of the Scheme 1 IL&FS Infra Asset Management Ltd.# IL&FS Infrastructure Debt Fund # No new investment in the above shall be reckoned as investment in infrastructure sector. h. Investment in M/s L&T Infra Debt Fund – NBFC20 1. Insurer’s investment in Infrastructure Debt Fund, backed by Central Government, approved on a case to case basis, by IRDAI shall be reckoned for investments in infrastructure. 2. Insurer’s investment into Rs. 500 Crores of Secured, Redeemable and Non- Convertible Debentures of M/s L&T Infra Debt Ltd, shall be reckoned as a part of “Investments in Infrastructure” 3. The investment shall be subject to all exposure norms under Note 3 to Regulation 9 of IRDAI (Investment) Regulations, 2016 along with Circulars and Guidelines issued there under. 4. The categorization of the above investments between “Approved Investments” or “Other Investments” shall be based on the rating of the instrument from time to time i. Investment in Onshore Rupee Bonds issued by Asian Development Bank (ADB) and International Finance Corporation (IFC) 21 1. The Central Government, in exercise of the powers conferred under clause (iia) of sub section (h) of Section 2 of SCRA, 1956 declared “Onshore Rupee Bonds” issued by multilateral institutions like the Asian Development Bank and the International Finance Corporation as “Securities” within the meaning of subsection (h) of Section 2 of the SCRA, 1956 vide Gazette notification Dt. 1st August, 2014 2. Insurers are permitted to invest in the proposed Onshore Rupee Bonds of International Finance Corporation(IFC) of $ 5 Billion equivalent fund, as a part of “Approved Investments” [in exercise of powers conferred by Insurance Act, 1938 under Section 27A(1)(s) for Life Insurers and under Section 27B(1)(j) for General Insurers] over 10 year period, for utilizing the bond proceeds to fund IFC’s projects in India that require Rupee financing, subject to the following: a. The Bonds are governed by norms, if any, laid by Government of India, b. Public Issue of Bonds shall be duly approved by SEBI c. The proceeds of the issue shall mean for investment in India as per Section 27Eof Insurance Act, 1938 d. Bonds shall fulfill the rating criteria for “Approved Investments” under IRDAI(Investment) Regulations, 2016 as amended from time to time. Where SEBI exempts the rating requirement from the rating agencies registered with SEBI in view of the rating obtained from International rating agencies, then such equivalent rating, applicable for “Approved Investments” under IRDAI (Investment) Regulations, 2016, received from International rating agencies shall be considered 20IRDA/INV /CIR/008/01/2014 Dt. 07th January 2014 21IRDA/F&I/CIR/INV/196/08/2014 Dt. 14th Aug 2014 Investment – Master Circular Page 18 of 100 e. Where most of the proceeds are invested in “Infrastructure”, the investment shall qualify for “Infrastructure Investments”, else the same shall be classified as a part of BFSI exposure. j. Investment in M/s India Infradebt Limited IDF– NBFC 22 1. Insurers Investment in the additional issue of Rs. 500 Crores of Non-Convertible Debentures of M/s India Infradebt Ltd., shall be reckoned as part of Investments in Infra Sector, along with the earlier issue Rs.500 Crores. 2. The exposure limits and Industrial classification of such investment in the above shall be subject to Note 3 to Regulation 9 of IRDA (Investment) Regulations, 2016 read with Circulars and Guidelines issued. 3. The categorization of the above investments between “Approved Investments” or “Other Investments” shall be based on the rating of the instrument from time to time. k. Investments in IDFC Infra Debt Fund Limited - NCD 1. Insurers Investment in the additional issue of Rs. 1000 Crore of Non-Convertible Debentures of M/s IDFC Infra Debt Fund Limited shall be reckoned as part of Investments in Infra Sector, along with the earlier issue of Rs.1500 Crores. 2. The exposure limits and Industrial classification of such investment in the above shall be subject to Note 3 to Regulationn9 of IRDA (Investment) Regulations, 2016 read with Circulars and Guidelines issued. 3. The categorization of the above investments between “Approved Investments” or “Other Investments” shall be based on the rating of the instrument from time to time. 1.8 DERIVATIVES a. Exposure to Interest Rate Derivatives23 Financial Derivatives are permitted to “hedge” Interest Rate Risk of Forecasted Transactions; in accordance with the guidelines issued by the Authority vide Regulation 15 of IRDAI (Investment) Regulations, 2016. Accordingly, Insurers can enter Forward Rate Agreements (FRAs), Interest Rate Swaps (IRS), Exchange Traded Interest Rate Futures (IRF) to “hedge” Interest Rate risk on forecasted transactions, for Life, Pension & General Annuity Business and General Insurance Business. Interest Rate Derivatives are not permitted for ULIP Business A. Insurers are allowed as user with following types of Rupee Interest Rate Derivatives to the extent permitted, and in accordance with these guidelines. i. Forward Rate Agreements (FRAs); ii. Interest Rate Swaps (IRS); and iii. Exchange Traded Interest Rate Futures (IRF). 22IRDA/INV/CIR/250/11/2014 Dt. 26th Nov 2014 23IRDA/F&I/INV/CIR/138/06/2014 Dt. 11th June 2014 Investment – Master Circular Page 19 of 100 Participants can undertake different types of plain vanilla FRAs/IRS. IRS having explicit/implicit options features are prohibited. It is to be noted that FRAs and IRS are Over-the-counter (OTC) contracts B. RBI Circulars & Guidelines on Rupee Interest Rate Derivatives Insurers are required to adhere to the following RBI Circular / Guidelines, as amended from time to time, on Rupee Interest Rate Derivatives: i. IDMC:MSRD.4801/06.01.03/2002-03 Dt 3rdJun, 2003 ii. RBI/FMRD/2021-22/84 FMRD.FMD.07/02.03.247/2021-22 September 16, 2021 Also, Insurers shall comply with circulars issued and amended from time to time, by Securities and Exchange Board of India (SEBI) on Rupee Interest Rate Derivatives C. Permitted Purpose for Exposure to Interest Rate Derivatives Hedging for forecasted transactions i. Reinvestment of maturity proceeds of existing fixed income investments; ii. Investment of interest income receivable; iii. Expected policy premium income receivable on the Insurance Contracts which are already underwritten in Life and Pension & Annuity business in case of Life Insurers and General Insurance business in case of General Insurers. The overriding principle of any use of the above listed derivatives is that they must be used only for hedging to reduce interest rate risk. The Insurer should have a system to clearly track the Interest rate risk. To consider expected policy premium income for hedging, Insurers shall document and justify persistency assumptions as part of the hedge program development process. Assumption documentation and justification shall indicate the joint review and approval of both Appointed Actuary and CRO under the oversight of the Insurer’s Board (for example, via the Asset Liability Management Committee) D. Regulatory Exposure and Prudential Limits i. Counter parties shall necessarily be Commercial Banks and Primary Dealers (PDs) as permitted by RBI for FRAs and IRS. ii. Insurers dealing in FRAs and IRS have to arrive at the credit equivalent amount for the purposes of reckoning exposure to counter-party. For the purpose of exposure norms, Insurance companies shall compute their credit exposures, arising on account of Interest rate derivative transactions using the Current Exposure Method (CEM) as detailed below: Investment – Master Circular Page 20 of 100  The Credit Equivalent Amount of a market related off-balance sheet transaction calculated using the current exposure method is the sum of current credit exposure and potential future credit exposure of these contracts.  Current credit exposure is defined as the sum of the gross positive mark-to-market value of these contracts. The Current Exposure Method requires periodical (at agreed periodicity) calculation of the current credit exposure by marking these contracts to market, thus capturing the current credit exposure.  Potential future credit exposure is determined by multiplying the notional principal amount of each of these contracts irrespective of whether the contract has a zero, positive or negative mark-to-market value by the relevant add-on factor indicated below according to the nature and residual maturity of the instrument. Credit Conversion Factors: Notional principal amount of each FRA/IRS shall be multiplied with the following conversion factor: Residual Maturity Conversion Factor per year One year or less 0.5 per cent Over One year to five year 1.0 per cent Over five years 3.0 per cent [Example: If IRS of Rs. 10 crore with maturity of 4 years is entered into by the Insurance company with the counter party A, then the potential future credit exposure = 10 x 3.5% = Rs. 0.35 crore (i.e. 3.5% = 0.5% for First year + 1% for next each year for 3 years as the duration is 4 years)] i. The Credit Equivalent Amount of the FRA / IRS shall be used for reckoning counter party credit exposure for the purposes of the IRDAI (Investment) Regulations, 2016 as amended from time to time ii. For exchange traded IRFs, the industry exposure limit is calculated against the Central Counter Party i.e. Clearing Corporation on the basis of above Credit Equivalent Amount. iii. Exposure limits pertaining to single Issuer, Group and Industry will be applicable for the exposure through FRA and IRS contracts. Counter party rating shall be considered for calculating pattern of investments. The limits shall be reported in the remarks column of the respective quarterly returns. iv. A Participant’s dealing in Interest Rate derivatives under these guidelines shall in aggregate not exceed an outstanding notional principal amount equivalent to 100% of the book value of the fixed income investments of the Participant under the Policyholders Fund and the Shareholders Funds taken together. Life Insurers shall normally adhere to the 100% limits based on respective funds i.e. Life and P&A Fund. But where, in the case of Funds, the book value of the existing investments is lower than the expected premiums on the underwritten insurance contracts, the Insurer can utilize the exposure limit available in other funds within the overall 100% limit, provided the Board of the Insurer specifically approves, prior to entering into such derivative contract. The MTM gain/loss arising out of the effective hedge shall be borne by the respective fund only v. If reinvestment of maturity proceeds of the existing investments/ interest income receivable on investments is hedged, such investments shall be held till maturity. If unavoidable need arises to liquidate instrument to meet the ALM, the hedge on such instrument has to be unwound simultaneously after obtaining specific approval Investment – Master Circular Page 21 of 100 from Investment Committee. IC shall grant such approval after due recording of the reasons, provided the charges for unwinding the derivative contract is borne by the Shareholder E. Insurers shall ensure all documentation requirements complete in all aspects as per RBI guidelines and documentation prescribed by ISDA (International Swaps and Derivative Association). Further, to settle the mark to market profits/losses and maintenance of collateral, two-way CSA (Credit Support Annex - an agreement between counterparties on the types of collateral and posting mechanism) agreements shall be mandatory to mitigate counterparty risk. All derivative contracts shall be subject to conditions mentioned in Indian laws & Jurisdiction of Indian courts and shall be consistent with Regulations / Circulars / Guidelines issued in this regard. Suitable clauses shall be incorporated to comply with the Insurance Act, 1938, IRDAI (Investment) Regulations, 2016, SEBI Regulations, RBI Guidelines applicable. Insurers shall necessarily have power to terminate the contract as and when desired. F. Accounting of Interest Rate Derivatives shall be as per Accounting Standard as prescribed by ICAI and as amended from time to time. The presentation in the financial statements and disclosures shall be governed by Accounting Standards issued by ICAI. Further, the Insurer shall disclose the following in the Financial statements: i. Description of Participant’s financial risk management objective and policies, in particular its policy for hedging forecasted transactions. ii. Hedging strategy. iii. Accounting Policy for Derivatives. iv. Nature and terms of outstanding Interest Rate derivative contracts. v. Quantification of the losses which would be incurred if counter-parties failed to fulfil their obligation under the outstanding Interest Rate derivative contracts. G. Internal Risk Management Policy & Processes, Exposure & Prudential Limits Each participant should, before taking exposure to Interest Rate derivatives, frame detailed pre-approved risk management policy by the Board of Insurer, which shall cover the following minimum: i. Insurer’s overall appetite for taking risk and ensure that it is consistent with its strategic objectives, capital strength etc. ii. Define the approved derivatives products and the authorized derivatives activities. iii. provide for sufficient staff resources and other resources to enable the approved derivatives activities to be conducted in a prudent manner; iv. ensure appropriate structure and staffing for the key risk control functions; v. establish management responsibilities; vi. identify the various types of risk faced by the Insurer and establish a clear and comprehensive set of limits to control these; Investment – Master Circular Page 22 of 100 vii. establish risk measurement methodologies which are consistent with the nature and scale of the derivatives activities; viii. require stress testing of risk positions; ix. detail the type and frequency of reports which are to be made to the board (or committees of the board); x. Applicable VAR limits. xi. Circumstances for termination and closure of the contract. xii. accounting treatment of the proposed derivatives in the company, and xiii. Solvency / capital impact due to the use of derivatives. The implementation of the policy shall be the responsibility of the Investment committee (IC) under the oversight of Insurer’s Board. The Insurer shall intimate the Authority, prior to taking any derivative exposure, as per the Guidelines issued. H. Suitability and Appropriateness Policy The Board shall ensure that the Rupee Interest Rate Derivatives address the need of the portfolio handled by the Insurer and are clearly mapped to Products of the Insurer. The Board shall confirm the suitability and appropriateness as evaluated in terms of clause 5.1.3 of RBI/FMRD/2021-22/84 FMRD.FMD.07/02.03.247/2021-22 Dt.16th September,2021 Master Direction- Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021. I. Corporate Governance In taking exposure to potentially complex products the Board and the senior management of insurer should take note of the nature of the risk undertaken, complexities involved, stress levels etc. Insurance companies shall at least once in a Quarter, report their Derivative Positions / Transactions and Policy / Limits compliance to Risk Management Committees under the Board of the Insurer. At periodical intervals (at least once in an year), the Board of Directors shall review the contracts undertaken and satisfy themselves that adequate risk measurement, management policy and procedures for interest rate risk with fixed income derivative contracts permitted in these guidelines, have been established and are functional. J. Chief Risk Officer (CRO) Role & Responsibilities The CRO, shall be responsible for monitoring / reporting of all aspects of “each” derivative program and shall report compliance to the Asset Liability Management Committee / Risk Management Committee of the Board and also to the Board of the Insurer. Where any particular hedging program is not in compliance with the Circular / Guidelines issued in this regard, the CRO shall identify the same and shall be responsible to bring the program to compliance. Investment – Master Circular Page 23 of 100 b. Exposure to Credit Default Swaps24 1. The Reserve Bank of India, vide notification No. RBI/2021-22/88 FMRD.DIRD. 10/14.03.004/2021-22 dated February 10, 2022 has issued the ‘Master Direction – Reserve Bank of India (Credit Derivatives) Directions, 2022’ effective from 10th February, 2022. The said guidelines inter alia, provide for insurer’s participation as protection buyer and seller for Credit Default Swaps in OTC market. 2. Insurers are allowed only as “Users” (protection buyers) of CDS subject to the following: a. The CDS are permitted as a “hedge” to manage the Credit Risk covering the credit event. The category of the investment will not change pursuant to buying CDS on such underlying. b. CDS will be allowed only on listed corporate bonds as reference obligations. CDS can also be bought on unlisted but rated bonds of Infrastructure companies. Besides, unlisted / unrated bonds issued by the SPVs set up by the infrastructure companies are also eligible as reference obligation as permitted in the RBI Master Direction Dt. 10th February, 2022. c. On purchase of protection, the exposure with respect to reference entity shall shift to “Protection Seller” to the extent of “Protection Purchased” within Regulation 9 of the IRDAI (Investment) Regulations, 2016 and such exposure shall form part of BFSI Sector, under Industry Sector Exposure. d. CDS shall not be purchased: i. On Reference Asset belonging to the promoter group and NO CDS transaction shall be made between entities belonging to Promoter Group. ii. On The obligations such as asset-backed securities/mortgage-backed securities, convertible bonds and bonds with call/put options, CLOs, CDOs or any other pool of assets/loans. 3. Insurers shall comply with all other norms pertaining to the eligibility norms for the counter party to the User, reference obligation, requirement of underlying, conditions while exiting the CDS transactions by Users, Credit events, settlement methodologies, documentation, pricing/valuation methodologies, other requirements and accounting norms etc. as prescribed by RBI vide Master Direction Dt. 10th February,2022. 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)” Insurers can invest in Units of Listed REITs / Listed InvITs which conform to the following: i. The REIT / InvIT rated not less than “AA” shall form part of Approved Investments. REIT / InvIT rated less than AA shall form part of Other Investments. 24IRDA/INV /CIR/247/11/2012 Dt 27th Nov 2012 Investment – Master Circular Page 24 of 100 ii. The Investments in units of InvITs and REITs shall not exceed 3% of total fund size of the Insurer at any point of time. iii. No Insurer shall invest more than 5% of the Units issued by a single REIT / InvIT (including the current issue) in a single InvIT/REIT. iv. No investment shall be made in REIT /InvIT where the Sponsor is under the Promoter Group of the Insurer v. Investment in Units of InvIT will form part of “Infrastructure Investments”, for the purpose of Pattern of Investments under IRDAI (Investment) Regulations vi. Investment in Units of REIT will form part of Investment Property as per Note 6 to the Regulation 9 of IRDAI (Investment) Regulations, 2016 read along with Master Circular – Investments. vii. The Investment in Units of REIT / InvITs shall be valued at Market Value (last Quoted price should not be later than 30 days). Where Market Quote is not available for the last 30 days, the Units shall be valued as per the latest NAV (not more than 6 months old) of the Units published by the trust. b) Investments in Debt Securities of “Real Estate Investment Trusts (REIT) & Infrastructure Investment Trusts (InvIT) Insurers can invest in “Debt Securities” issued by listed InvITs / REITs which conform to the following: i. The debt Instruments shall be issued by listed InvITs / REITs and rated “AAA” at the time of Investment. ii. The public holding in the InvIT / REIT shall not be less 30% of the total outstanding units of the InvIT / REIT at the time of Investment. ]21b iii. The Debt Instruments of InvIT / REIT shall be rated and not less than “AA” as a part of Approved Investments. iv. Debt Instruments of InvIT / REITs rated and or downgraded below “AA” shall form part of Other Investments. v. No Insurer shall invest more than 20% of the outstanding debt instruments (including the current issue) in a single InvIT / REIT. vi. The investment in Debt Instruments of REITs shall not exceed 3% of total fund size of the insurer at any point of time. vii. The investment in Debt Instruments of InvITs shall be subject to sectoral limits applicable to Infrastructure Sector. ]25 viii. No investment shall be made in Debt instruments of an InvIT / REIT where the Sponsor is under the Promoter Group of the Insurer. ix. Group shall have the meaning as defined under Regulation 2(g) of IRDAI (Investment) Regulations, 2016 x. Investment in Debt Instruments of InvIT will form part “Infrastructure Investments”. 25IRDA/FI/CIR/INV/165/8/2022 Dt.3rd August 2022 Investment – Master Circular Page 25 of 100 xi. Investment in Debt Instruments of REIT will form part of industry group “Real Estate Activities” under NIC Industry Classification.]26 xii. The Investment in Debt Securities of InvITs / REITs shall be valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI.]27 1.10 CREDIT RATING- APPLICABLE FOR INFRASTRUCTURE INVESTMENTS Insurers to classify Infrastructure investments, issued by Infrastructure Companies, rated not less than “A” along with an Expected Loss Rating of “EL1” as part of “Approved Investment” and should be listed under Category Code “IELB”. Further, any downgrade of Infrastructure Investment, below “A” or “EL1”, needs to be re-classified as part of “Other Investments” and reported under Category Code “IOEL”. The valuation of the above investments, shall be valued “either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI28 1.11 DIVIDEND CRITERIA FOR EQUITY INVESTMENT UNDER “APPROVED INVESTMENT” Insurers shall classify investments in Preference Shares and Equity Shares as part of “Approved Investment” if dividend is paid on such Shares “for at least 2 years out of 3 consecutive years immediately preceding” instead of “for at least 2 consecutive years immediately preceding” (as required under Regulation 3(a)(4) and 3(a)(5) of IRDAI (Investment) Regulations, 2016.29 1.12 EXPOSURE OF INSURERS TO BANKING, FINANCIAL SERVICES AND INSURANCE (BFSI) ACTIVITIES Insurers can have exposure to Financial and Insurance activities (as per section K of NIC classification) up to 30% of Investment assets. Accordingly, the limit of 25% of Investment Assets mentioned in Note no. 8 to Reg.9 of IRDAI (Investment) Regulations, 2016 stands revised to a limit of 30% of Investment Assets.30 26 IRDAI/F&I/CIR/INV/098/04/2021 Dt.22nd Apr, 2021 27 IRDAI/F&I/CIR/INV/098/04/2021 Dt. 22nd Apr, 2021 28 IRDAI-F&I-CIR-INV-008-01-2021 Dt. 5th Jan, 2021 29 IRDA/FI/CIR/INV/165/8/2022 Dt.3rd August 2022 30 IRDAI/F&I/CIR/INV/81/04/2022 Dt: 29th April, 2022 Investment – Master Circular Page 26 of 100 2. RISK MANAGEMENT AND CONCURRENT AUDIT 2.1 INVESTMENT RISK MANAGEMENT SYSTEMS AND PROCESS a. General 1. Front, Mid & Back Office Operations i. Insurer with Assets under Management (AUM) in excess of Rs.500 Crores shall ensure separate personnel acting as fund manager and dealer. ii. The Investment System (Application Software) should have separate modules for Front, Mid and Back Office with separate login. iii. Data transfer from Front Office to Back Office should be through the System, on Real time basis. iv. The Insurer may have multiple Data Entry Systems, but all such Systems should be seamlessly integrated without manual intervention. v. The Front Office shall report through the Chief Investment Officer (CIO) to the Chief Executive Officer (CEO). The Mid Office and Back Office shall report to CFO who shall independently report to the CEO. CIO and CFO shall be independent personnel with separate login. Further, CRO shall be responsible for framing the Risk policy and through CEO shall report to the Risk Committee of the Insurer’s Board. vi. The Investment Application should have clear segregation (at database level) between Front, Mid and Back Office 2. Employee Dealing Guidelines The Standard Operating Procedure (SOP) followed by the Insurer shall clearly specify the Guidelines to be adhered by employees in the Front, Mid and Back Office for personal investments. The Internal / Concurrent Auditor shall report on compliance to adherence to this requirement. 3. Maker Checker Process Insurer should have the procedure of Maker / Checker mapped in their Standard Operating Procedure / Operations Manual of Investment Operations. The Internal / Concurrent Auditor shall comment on such practice in his report. 4. Audit Trail at Data Entry Points The Audit trail should be available at all data entry points including the Checker / Authorizer level. 5. Business Continuity Process (BCP) To ensure Business continuity, the Insurer should have an Off-site Back-up of Data in a City falling under a different Seismic Zone, either on his own or through a Service Provider. Further, the Insurer / Investment – Master Circular Page 27 of 100 service provider (if outsourced) is required to have the necessary infrastructure for Mission Critical Systems to address at least the following: 1. Calculation of daily NAV (Fund wise) 2. Redemption processing. b. Front Office 1. Segregation of Fund Manager / Dealer i. Investment Department should have documented the segregation of Fund Managers and Dealers through Authority Matrix as a part of its ‘Standard Operating Procedure’. ii. The Insurer should have documented the Access Controls and Authorization process for Orders and Deal execution. iii. The Dealing Room should have a Voice Recorder and procedure for maintaining the recorded conversation and their disposal including procedure like no mobile phone usage in dealing rooms and other best practices. 2. Investment in Investee / Group Company / Industry Sector System based checks should be in place for investments in an Investee Company, Group, Promoter Group and Industry Sector. The system should signal when the Internal / Regulatory limits are nearly reached PRIOR to taking such exposure and making actual investment. 3. Intra Fund Transfer i. There can be no transfer of securities: a. Between Life fund, Pension Fund and ULIP fund(s). b. Within Life Fund and Pension fund, systems should not allow any transfer between Par and Non- Par funds. c. Within Pension funds, the system should not permit any transfer between Individual and Group funds. ii. The Cut Off time shall be clearly specified in the SOP. Such cut off time shall remain consistent and cannot be changed without the prior approval of the Board of the Insurer. iii. The intra fund transfer should be like any other Market deal and the same needs to be carried out at the Market rate at the cut off time. c. Mid Office 1. Market Risk i. The system should be capable of computing various portfolio returns. ii. Exposure limits monitoring and Exception Reporting shall be done by the Mid Office Investment – Master Circular Page 28 of 100 2. Credit Risk i. The Investment System should capture Instrument Ratings to auto generate FORM 2 (Statement of Downgraded Investments) ii. System should automatically monitor various Regulatory limits of Instrument level, Group level, Promoter Group level and Industry Sector level exposure. iii. The System should have the ability to track changes in ratings over a period & generate appropriate alerts, along with ability to classify investment between Approved and Other Investments iv. The Insurer should conduct periodic credit reviews for all companies in the portfolio. The periodicity should be clearly mentioned in the Investment Policy which shall not be more than a year. v. The Insurer is required to keep a track of movement of Securities between Approved and Other Investments Status, as a part of Audit trail, at individual security level. 3. Tracking of Regulatory Limits i. The System should have key limits pre-set to ensure compliance for all Regulatory requirements and should be supported by workflow through the System, (Real time basis) for such approval, if Regulatory limit is close to be breached. ii. The System should have capability of generating Exception reports for Audit by Internal / Concurrent Auditor. 4. Settlement Risk The System should be validated to restrict Short Sales at the time of placing the order. 5. Review, Monitoring and Reporting i. System should automatically track and report all internal limits breaches. All such breaches should be audited by Internal / Concurrent Auditor. ii. Implementation and Review of & Liability Matching and other Investment Policy Guidelines. d. Back Office 1. Data Input Error The system should be specifically validated such that, Deal can be REJECTED ONLY by Back Office and can NEVER BE EDITED. The System should generate a list of Deals that have not been settled / rejected as a part of Audit trail. 2. Liquidity Risk i. The Insurer should have a Cash Management System to provide the funds available for Investment considering the settlement obligations and subscription and redemption of units etc., to prevent any leveraged position or liquidity risk. ii. The System should be validated not to accept any commitment beyond availability of funds. Investment – Master Circular Page 29 of 100 3. Computation of ‘NAV’ i. The Insurer should maintain NAV history (Fund wise) in his Public Domain from the Start of the Fund to Current Date. Also, the NAV should be uploaded in the Life Council Website on a day to day basis. ii. ‘NAV’ error – Computation & Compensation 1. All expenses and incomes accrued up to the Valuation date shall be considered for computation of NAV. For this purpose, while major expenses like management fees and other periodic expenses should be accrued on a day to day basis, other minor expenses and income can be accrued on a weekly basis, provided the non-accrual does not affect the NAV calculations by more than 1% (one percent). 2. Any changes in Securities and in the number of Units should be recorded in the books not later than the first valuation date following the date of transaction. If this is not possible, the recording may be delayed up to a period of seven days following the date of the transaction. Provided, the non-recording does not affect the NAV calculations by more than 1 (one percent). 3. In case the NAV of a Plan differs by more than 1% due to non - recording of the transactions or any other errors / mistakes, the investors or fund(s) as the case may be, shall be paid the difference in amount as follows: - (i) If the investors are allotted units at a price higher than NAV or are given a price lower than NAV at the time of sale of their Units, they shall be paid the difference in amount by the plan. (ii) If the investors are charged lower NAV at the time of purchase of their units or are given higher NAV at the time of sale of their units, the Insurer shall pay the difference in amount to the Plan and shall be compensated from Shareholders portfolio that does not support Solvency Margin. (iii) The Internal / Concurrent Auditor shall look into the above issues and specifically report to the Board’s Audit Committee on it and comment on the Systems in place to take care of such issues on an ongoing basis. (iv) A log of NAV errors shall be maintained in the System and be forwarded to Internal / Concurrent Auditors. 4. Equity Deals to be put through STP gateway All Equity deals shall be through STP gateway for all broker transactions. 5. Uploading of Valuation Price Files The System shall have the provision take uploads of Corporate Actions such as Stock Splits, Dividend, Rights Issue, Buy Back, Bonus issues etc., for computing NAV / Portfolio valuation. Investment – Master Circular Page 30 of 100 6. Reconciliation i. Fund wise, in the case of Life Insurers, reconciliation with Investment Accounts, Bank, and Custodian records should be done on day-to-day basis for all types of products. In the case of ULIP products, Units reconciliation with Policy Admin Systems should be ensured on a day to day basis. ii. In the case of General Insurer / Re-insurer reconciliation with Investment Accounts, Bank and Custodian records should be done on a day-to-day basis. 7. The total volume of the business including debt and equity given to each empanelled Broker shall be monitored on rolling three months basis to ensure that none of the panel broker exceeds the limit of 5% of the total actual secondary market transactions through brokers, up to that particular period. 2.2 AUDIT OF INVESTMENT RISK MANAGEMENT SYSTEMS & PROCESS, INTERNAL / CONCURRENT AUDIT 1. IRDAI (Investment) Regulations, 2016 under Regulation 13 (D) (1) mandates certification by a Chartered Accountant firm, for implementing Investment Risk Management Systems and Process, as per the procedure laid down in the “Guidance note on Review and Certification of Investment Risk Management Systems and Process of Insurance Companies”. Further, Regulation 13 (E) (2) requires all investment transactions covering both Shareholders and Policyholders funds be audited through Internal or Concurrent Auditor. 2. Insurers having Assets under Management (AUM) not more than Rs.1000 Crores shall have its Investment functions audited on a Quarterly basis through Internal Audit (either through internal resources or through firms of Chartered Accountants) and Insurer with AUM of over Rs.1000 Crores (for the first time) shall appoint a firm of Chartered Accountants as Concurrent Auditor to have its Investment transactions and related Systems audited on a concurrent basis. a. Audit of “Investment Risk Management Systems and Process” 1. The Insurer, shall through a Chartered Accountants firm, who is not the Statutory or Internal or Concurrent Auditor of the concerned Insurer shall get certified the Investment Risk Management Systems and Processes as per the ‘Guidance Note on Review and Certification of Investment Risk Management Systems and Process of Insurance Companies’ issued by the Institute of Chartered Accountants of India (ICAI), in consultation with IRDAI 2. All companies seeking IRDAI registration shall file a report certified by a Chartered Accountant firm, on the preparedness of the applicant company to comply with the various Systems listed in the “Guidance Note on Review and Certification of Investment Risk Management Systems and Process of Insurance Companies”, when the company seeks R3 under IRDAI (Registration of Indian Insurance Companies) Regulations, as amended from time to time. The report shall indicate further actions required to be taken by the company Investment – Master Circular Page 31 of 100 3. The Investment Risk Management Systems and Process shall be reviewed once in two financial years or such shorter frequency as decided by the Board of the Insurer (the gap between two such audits should not be more than two years), by a Chartered Accountant firm and file the certificate issued by such Chartered Accountant, with the Authority along with the first quarter returns. b. Internal / Concurrent Audit of Transactions 1. All Insurers, having Assets under Management (Shareholders and Policyholders funds taken together) of not more than Rs.1000 Crores shall have its transactions and related systems audited through its internal Audit Department, headed by a Chartered Accountant, at least on a on Quarterly basis and where the AUM is equal or over Rs. 1000 Crores (for the first time) shall have the Investment transaction concurrently audited, by a Chartered Accountant firm, appointed as per the procedure listed below. 2. The ‘minimum’ Scope for both Internal Audit and Concurrent Audit shall be as per the “Guidance Note on Internal / Concurrent Audit of Investment Functions of Insurance Companies” issued by ICAI (in consultation with IRDAI) for both Life and Non-Life Insurers. The Insurer could include additional scope to suit their specific needs based on their control systems. The Internal / Concurrent Audit shall cover 100% of transactions of all fund(s) as per the periodicity prescribed. c. Appointment of Audit Firms for “Investment Risk Management Systems & Process” 1. The Chartered Accountant firm shall be a firm, registered with the Institute of Chartered Accountants of India 2. The Audit firm should have experience, for at least four years, in conducting reviews of Risk Management Systems and Process of either Banks or Mutual Funds or Insurance Companies or have, on behalf of IRDAI conducted Investment Inspection of Insurance Companies 3. On the date of appointment as an Auditor for certifying Investment Risk Management Systems and Process, the Auditor must not hold more than two audits of Internal, Concurrent and Risk Management Systems Audit, all taken together. Hence, the Audit firm, can at the maximum hold not more than three Audits (i.e., Investment Risk Management Systems and Process Audit, Internal Audit, Concurrent Audit – all taken together), apart from Statutory Audits at any point of time. For this purpose, at the time of appointment, the insurer shall obtain a declaration to this effect from the firm of Chartered Accountants. The Insurer shall, file with IRDAI, the confirmation obtained from the Chartered Accountant firm, within 7 days of such appointment. 4. The Auditor should not have been prohibited/debarred by any regulating agency including IRDAI, RBI, SEBI, ICAI etc., 5. The Auditor appointed for certifying the Investment Risk Management Systems and Process, should not have conducted the following assignments for the same Insurer proposing to be appointed as Systems Auditor, for a period of two years immediately preceding his appointment. a. Statutory Audit b. Any Internal Audit c. Any Concurrent Audit d. Any consulting assignment, whether or not related to Audit functions Investment – Master Circular Page 32 of 100 d. Appointment of Audit Firm for Internal / Concurrent Audit of Transactions 1. The Chartered Accountant firm complies with points c (1), (2), (3) and (4) above. 2. The Internal/Concurrent audit term shall be for the financial year and where the appointment is made during the course of the financial year, it shall be up to the end of that financial year. 3. The Internal / Concurrent Auditor shall be appointed by the Audit Committee of the Insurer’s Board and the Auditor shall directly report to the Audit Committee of the Insurer’s Board. Any change in Auditor during the middle of the term, shall be communicated to IRDAI with the reasons for such change. The new Auditor, only for the remaining term, shall be appointed only with the prior approval of IRDAI 4. The Internal / Concurrent Auditor shall not be eligible for re-appointment, with the same Insurer after serving three consecutive years or three years during the preceding five years. 5. The Internal / Concurrent Auditor appointed for the first time should NOT have conducted the following assignments for the same Insurer proposing to be appointed as Internal or Concurrent Auditor for Investment functions during a period of two years immediately preceding his appointment as Internal or Concurrent auditor. a. Statutory Audit b. Any Internal Audit c. Any Concurrent Audit d. Any consulting assignment, whether or not related to Audit functions e. Reviews or Certification of Investment Risk Management Systems and Process 6. Every Insurer, upon appointing the firm of Chartered Accountants as Internal or Concurrent or Risk Management Systems Auditor shall send a communication to IRDAI, within seven days of such appointment, confirming such appointment with the details as under: e. Information of Audit Firm for Internal / Concurrent Audit to be filed with IRDAI 1. Name of the Chartered Accountant firm 2. Year of establishing the firm, Partners with contact details 3. Address of Head Office of the Audit Firm 4. Experience Details, (relevant for Insurer’s Risk Management Systems Audit / Statutory Audit / Internal Audit / Concurrent Audit) as provided by the Firm 5. Name of the Partner along with contact details, responsible for signing Risk Management Audit Report / Internal Audit Report/ Concurrent Audit Report 6. All the above information shall be filed with IRDAI, within 7 days from the date of appointment Investment – Master Circular Page 33 of 100 2.3 REPO, REVERSE REPO IN GOVERNMENT SECURITIES AND CORPORATE DEBT SECURITIES All Insurers shall file a quarterly certificate issued by the Concurrent Auditor specifically on Repo transactions (borrowing) and the same shall form part of the certificate issued as per the Technical Guide on Internal / Concurrent Audit of Insurance Companies issued by ICAI. 2.4 INVESTMENT IN EQUITY EXCHANGE TRADED FUNDS31 Concurrent Auditor shall comment on the compliance of the requirements prescribed for investments in ETFs during the audit period. 2.5 EXPOSURE TO CREDIT DEFAULT SWAPS32 1. The concurrent Auditor shall confirm that the requirements prescribed for undertaking CDS transaction have been incorporated in the investment policy, before taking any exposure to CDS. Such Certificate of the Concurrent Auditor, shall be filed with the Authority 2. The Concurrent Auditor shall in his Quarterly certification confirm that all CDS transactions, complies with the norms prescribed by RBI and IRDAI 2.6 EXPOSURE TO INTEREST RATE DERIVATIVES 33 1. Before taking any exposure to Interest Rate Derivatives, the Insurer shall file a Certificate issued by the Concurrent Auditor, and the Concurrent Auditor shall certify that the Insurer had implemented the minimum integrated automated Systems and Process, as required under the guidelines on Interest Rate Derivatives. 2. Systems Audit: Any Insurer to hedge the portfolio, within the Circulars / Guidelines issued by the Authority, shall carryout the Systems Audit, through the Auditor engaged as per the Guidance Note on “Investment Risk Management Systems and Process of Insurance Companies” of the Institute of Chartered Accountant of India, for Systems and Process to in place, as specifically listed for Derivatives in the Guidance Note on Investment Risk Management Systems and Process of Insurance Companies, before taking such exposure. All insurers who have taken derivative positions, shall unwind the positions, where there Systems and Process mandated are yet to be implemented 31IRDA/F&I/CIR/INV/074/03/2014 Dt 03rd Mar, 2014 32IRDA/INV/CIR/247/11/2012 Dt 27th Nov 2012 33IRDA/F&I/INV/CIR/138/06/2014 Dt 11th Jun 2014 Investment – Master Circular Page 34 of 100 2.7 INVESTMENT IN “ADDITIONAL TIER 1 (BASEL III COMPLIANT) PERPETUAL BONDS” [AT1 BONDS] The Concurrent Auditor in his Quarterly Report to the Audit Committee / Board of the Insurer shall confirm that all norms as per 1.6 of Master Circular is complied with. 2.8 INVESTMENT IN UNITS AND DEBT SECURITIES OF “REAL ESTATE INVESTMENT TRUSTS (REIT) & INFRASTRUCTURE INVESTMENT TRUSTS (INVIT) The Concurrent Auditor in his Quarterly Report to the Audit Committee/Board of the Insurer shall specifically confirm compliance to the provisions of this circular applicable to Investment in Units and Debt Securities of REITs / InvITs.34 2.9 CONTROL & MONITORING MECHANISM OF INVESTMENT OPERATIONS – WORK FROM REMOTE LOCATION 1. Insurers shall ensure that Concurrent Auditors shall check the deals entered/investments done while working from remote location and report any deficiencies observed. 2. The Concurrent Auditor shall comment on the systems and controls as per the extant guidelines of ICAI and also as per the internal/Board Approved controls/guidelines of the Insurer. The Insurers shall ensure to submit the comments of Concurrent Auditors to the Authority as a part of Quarterly Concurrent Audit Report.35 34 IRDAI/F&I/CIR/INV/098/04/2021 Dt. 22nd Apr, 2021 35 IRDAI/INV/001/2021 Investment – Master Circular Page 35 of 100 3. VALUATION GUIDELINES 3.1 INVESTMENT IN EQUITY EXCHANGE TRADED FUNDS36 The valuation of ETFs shall be in line with Annexure II of Master Circulars - Investments 3.2 SECURITIES LENDING AND BORROWING (SLB) FRAMEWORK37 1. Securities lent in SLB would be treated as if the Insurer owns such securities and all benefits arising on such securities shall be available to the Insurer i.e. the beneficial rights of the Insurer shall continue as per the SLB Frame work. 2. The lending fee shall be accounted for on accrual basis in view of the risk of early repay/recall of securities 3.3 INVESTMENT IN MUTUAL FUND38 1. The purchase and sale of Mutual Fund Units shall be calculated at Weighted Average Cost. Also, the insurer shall report the aggregate Market Value of such Mutual Funds in FORM 5 of IRDAI (Investment) Regulations, 2016 2. A separate Fair Value Change Account for Mutual Fund Investments shall be maintained 3. The unrealized gains / losses arising due to changes in fair value of the Mutual Funds shall be taken to ‘Fair Value Change – Mutual Fund’ account. The Profit / Loss on sale of Mutual Fund units, shall include accumulated changes in the Fair value previously recognized in Mutual Funds under the heading “Fair Value Change – Mutual Fund” in respect of a particular Mutual Fund and being recycled to Revenue / Profit and Loss Account on actual sale of Mutual Fund units. 4. The Insurer shall assess, on each Balance Sheet date, whether any diminution in the value has occurred to the Investment. A diminution in the value of investments shall be recognized as an expense in Revenue / Profit and Loss Account to the extent of the difference between the re-measured fair value of the Investment and its Cost as reduced by any previous diminution in value of investments is recognized as expenses in Revenue / Profit and Loss Account. Any reversal of diminution in value of investments earlier recognized in Revenue / Profit and Loss Account shall be recognized in Revenue / Profit and Loss Account. 5. In the case of Unit Linked Business, Mutual Fund units shall be valued at NAV. 36IRDA/F&I/CIR/INV/074/03/2014 Dt. 03rd March 2014 37IRDA/F&I/CIR/INV/134/2013 Dt. 12th July 2013 38IRDA/CIR/INV/020/2008-09 Dt. 22nd Aug 2008 Investment – Master Circular Page 36 of 100 3.4 INVESTMENT IN PERPETUAL DEBT INSTRUMENTS OF BANK’S TIER-I CAPITAL AND DEBT CAPITAL INSTRUMENTS OF UPPER TIER-II CAPITAL39 The valuation of AT1 Bonds and Tier II Bonds shall be as per the directions issued by SEBI for Mutual Funds from time to time. 3.5 INVESTMENT IN ONSHORE RUPEE BONDS ISSUED BY ASIAN DEVELOPMENT BANK (ADB) AND INTERNATIONAL FINANCE CORPORATION (IFC)40 The valuation of onshore rupee bonds shall be in line with the Corporate Bonds and Debentures. 3.6 EXPOSURE TO INTEREST RATE DERIVATIVES41 Accounting of Interest Rate Derivatives shall be as per Accounting Standard as prescribed by ICAI and amended from time to time. Initial Margin and Mark to Market Margin shall be accounted as part of Current Assets. 3.7 INCOME RECOGNITION, ASSET CLASSIFICATION, PROVISIONING AND OTHER RELATED MATTERS a. Assets classifications: 1. Every insurer shall make adequate provision for estimated loss arising on account of under recovery of loans and advances (other than loans and advances granted against insurance policies issued by the insurer) outstanding at the balance sheet date. These guidelines are intended to provide the basis for determination of minimum provisions of loss on account of loans and advances 2. Insurers shall classify their loans/advances into four categories, viz., (i) Standard Assets, (ii) Sub-Standard Assets, (iii) Doubtful Assets and (iv) Loss Assets. Classification of assets into these categories shall be done taking into account ability of the borrower to repay and the extent of value and realizability of security. 3. Standard Assets: Standard Asset is one which does not disclose any problem and which does not carry more than normal risk attached to the Business. Such an asset is not an NPA. The insurer should make a general provision on Standard Assets of a minimum of 0.40 per cent of the value of the asset. In respect of loans extended directly by insurers to sick units taken over by borrowers falling under the "Standard" classification, the facilities of the 39IRDA/CIR/INV/020/2008-09 Dt. 22nd Aug 2008 40IRDA/F&I/CIR/INV/196/08/2014 Dt. 14th August 2014 41IRDA/F&I/INV/CIR/138/06/2014 Dt. 11th June 2014 Investment – Master Circular Page 37 of 100 transferee and merged units may continue to be classified separately, for a period not exceeding 24 months from the date of the takeover of the sick unit, after which the performance of the loans sanctioned to the borrower as a whole should determine their classification. In cases of reverse merger (i.e., take-over of a healthy unit by a sick unit) as well, the facilities of both the units may continue to be classified separately for a period of 24 months after which the combined performance may be taken for asset classification. 4. Sub-Standard Asset: Sub-standard asset is one which has been classified as NPA for a period not exceeding 12 months, e.g., an asset which has been treated as a NPA on 1st April, 2021, would be treated as a sub-standard asset only up to 31st March 2022. In case of time overrun for completion of project directly financed by insurers, the Boards of Insurers should decide based on valid grounds, whether the advance should be treated as standard asset. An asset where the terms of the loan agreement regarding interest and principal have been renegotiated or rescheduled after commencement of production, should be classified as sub-standard and should remain in this category for at least two years of continually satisfactory performance under the revised terms. The classification of an asset should not be upgraded merely as a result of rescheduling, unless there is satisfactory compliance of the above condition. 5. Doubtful Assets: A doubtful asset is one which has remained as NPA for a period exceeding 12 months, e.g., a loan facility to a borrower which is treated as NPA on 1st April 2021, would be treated as 'doubtful' from 1st April, 2022. A loan classified as doubtful has besides the weakness inherent in that classified as sub-standard, with the continuing default makes the recovery in full, to be improbable. Here too, as in the case of sub-standard assets, rescheduling does not lead to upgradation of the category of the asset automatically. Similarly a doubtful asset which is subject to rehabilitation and where the asset has been subsequently continually satisfactorily serviced for one year shall be graduated to a standard asset. 6. Loss Assets: A loss asset is one where loss has been identified by the insurer or its internal or statutory auditors or by IRDAI, but the amount has not been written off wholly. In other words, such an asset is considered un-collectible and as such its continuance as a bankable asset is not warranted although there may be some salvage or recovery value. 7. Overdue Amounts Interest/Principal: An amount, whether interest or principal is said to be overdue if it is not paid to the insurer on the specified date. An asset is classified as an NPA if the interest and/ or installment of principal remain overdue for more than 90 days (i.e., one quarter). b. Provisioning for Loans and Advances: Taking into account the time lag between an account becoming doubtful of recovery, its recognition as such, the realization of the security and the erosion in the value of security charged to the insurers, it is necessary that Investment – Master Circular Page 38 of 100 insurers make adequate provisions against sub-standard assets, doubtful assets and loss assets, as per the procedure outlined below: i. Loss Assets: The entire asset should be written off. If the assets are to remain in the books for any reason, 100 per cent of the outstanding should be provided for. ii. Doubtful Assets: a) 100 percent provision of the extent to which the asset is not covered by the realizable value of the security to which the insurer has a valid recourse and the realizable value is estimated on a realistic basis. b) Over and above item (a) above, depending upon the period for which the asset has remained doubtful, 20% to 100% provision of the secured portion (i.e., estimated realizable value of the outstanding) should be made on the following basis: Period for which the Asset has been considered as Doubtful % of Provision Up to one year 20% One to three years 30% More than three years 100% iii. Sub-Standard Assets: A general provision of 10% of total value outstanding remaining substandard is required to be made including loans granted by the Central/State Government. In case of nursing finance granted by an insurer, the additional loan facilities sanctioned under the rehabilitation programme may be treated as a separate account and the performance assessed separately. Asset classification and provisioning in respect of such loan facilities as per the prescribed guidelines may be made only if the interest /principal payments remain due beyond 90 days. iv. Default in Repayment of Principal: On account of various reasons, such as delays in project implementation, getting adequate working capital facilities, etc., repayment of principal may be delayed beyond the stipulated one quarter. The asset may continue to be considered as standard if the installments of the principal amount are rescheduled with the approval of the Board of the concerned insurer. This is subject to the condition that the rescheduling can be done only once while the interest continues to be paid regularly. v. Time Overrun: In case of time overrun for completion of project directly financed by insurers, the Board of Insurer should decide based on valid grounds, whether the advance should be treated as standard asset. vi. One Time Settlement: Sometimes insurers enter into one-time settlement (OTS) of their dues with a new owner. In cases where a sick unit has been merged with a healthy and strong unit and where payments Investment – Master Circular Page 39 of 100 are being made as per the OTS scheme, the asset in respect of the merged unit may be considered as standard without waiting for a period of 2 years for upgradation from sub-standard to standard asset. However, such cases should be approved by the Board of the concerned insurer. It is clarified that the said relaxation is allowed only in OTS cases. 8. In respect of loan facilities extended to sick units (under nursing programmes or otherwise) taken over by borrowers falling under the “standard” classification, the facilities of the transferee and the merged units may continue to be classified separately for a period not exceeding 2 years from the date of takeover of the sick unit, after which the performance of the loan facility sanctioned to the borrower as a whole should determine their classification. 9. Units enjoying more than one loan facility: In case of borrowers who have been granted more than one loan facility by the insurer, all the dues from them will have to be treated as NPAs if 50 per cent of its total interest and/or principal dues from all loans extended to it remain overdue for more than one quarter. 10. Government Guaranteed Loans: Loans or other credit facilities backed by Central/State Government guarantees should be treated on par with other assets for income recognition and provisioning. However, in respect of loans backed by Central Government guarantee, such loans shall be treated as NPA only when the Government repudiates its guarantee when invoked. 11. Income Recognition: Income in respect of any asset classified as NPA shall not be recognized unless realized. However, any adjustment towards overdue interest against any fresh/additional loan shall not be considered as realized. 12. Insurers are permitted to participate in Joint Lenders Forum (JLF), formed within RBI Guidelines for loan accounts which could turn into potential NPAs, and take up need based exposure with the prior approval of the Insurers Board, which could exceed exposure permitted under IRDAI (Investment) Regulations. 13. The Insurer shall follow the latest RBI Circular / Guidelines issued on the above points, where the provisions of Master Circular – Investments, are inconsistent with respect to Point 3.7 of this Master Circular on “Income Recognition, Asset Classification, Provisioning and Other related items” c. COVID-19 - Rescheduling of Term Loans Considering the cash flow problems faced by borrowers and to be consistent with RBI’s direction vide Cir. RBI/20199-20/186 DOR.No.BP.BC.47/21.04.048/2019-20 Dated 27th March, 2020 and Cir: No: RBI/2019-20/244 DOR. No.BP.BC.71/21.04.048/2019-20 Dt. 23rd May, 2020, the following instructions are issued towards rescheduling of payments towards Term Loans: Investment – Master Circular Page 40 of 100 a. In Respect of term loans all Insurers are permitted to grant a moratorium of three months towards payment of all instalments falling due between 1st March, 2020 and 31st August, 2020. The repayment schedule for such loans and also the residual tenor, will be shifted across the board by three months subsequent to the moratorium period. b. Interest shall continue to accrue on the outstanding portion of the term loans during such moratorium period. c. The asset classification of term loans which are granted relief as per point no. (a), above shall be determined on the basis of revised due dates and revised repayment schedule. d. The rescheduling of payments, including interest, will not qualify as a default for the purpose of reporting of NPAs. e. Insurers shall frame Board approved policy for the above-mentioned reliefs to all eligible borrowers, by taking into account various factors including remaining tenure of loan, consortium or non-consortium lending, repayment capacity etc. f. Concurrent Auditor in their report for the quarter ending June, 2020 and Sep 2020 shall confirm that the insurer has complied with the Board Approved policy in granting moratorium.42 3.8 INSURERS BOARD TO DECIDE PRIMARY / SECONDARY EXCHANGE FOR VALUATION OF SECURITIES The Board of the insurer, only once, shall select NSE or BSE as the Primary and Secondary exchanges to take closing price for valuation of Equity Shares. Where the Share is not listed / not traded on the Primary Exchange, so selected, the closing price available on Secondary Exchange shall be used for valuation. The Concurrent Auditor shall certify that during the quarter, no change had been made in the exchange based on which the Equity Shares have been valued. 42 IRDA/F&I/CIR/INV/085/04/2020 Dt.8th April, 2020 Investment – Master Circular Page 41 of 100 4. OPERATIONAL PROCEDURES 4.1 REPO, REVERSE REPO IN GOVERNMENT SECURITIES AND CORPORATE DEBT SECURITIES 1. All Repo transaction shall also be reported to the Investment Committee and Board at least on a Quarterly periodicity 2. Insurer shall enter into bilateral Reverse Repo/ Repo agreement as per the documentation finalized by FIMMDA. Such additional clauses may also be inserted in the standard agreement to suit the specific needs of the Insurance regulatory framework provided such clauses should be more stringent than the standard clauses provided by FIMMDA. 3. In all other matters such as Accounting Methodology, reporting of trades, settlement of trades, prohibition on sale of repo security, haircut, valuation etc. related to such Repo and Reverse Repo transactions, Insurers shall follow the Directions given in notification IDMD.DOD.05/11.08.38/2009-10 Dt. January 8, 2010, issued by RBI and as updated from time-to-time. 4. The Board of the Insurer shall issue necessary Guidelines in the Investment Policy covering the following: i. Category of Counterparty ii. Credit rating of the instruments issued by the Counterparty iii. Exposure on the Counter party subject to the maximum limits prescribed in this circular iv. Maximum exposure on the specific Corporate Debt Instrument and the Issuer of such Debt Instrument v. Tenor of Collateral vi. Applicable Haircuts vii. The treatment of ‘downgrading of rating’ during the tenure of repo transaction 4.2 SECURITIES LENDING AND BORROWING FRAMEWORK43 1. Lending securities through SLB in the Funds shall be made only after approval of the Investment Committee. While considering approval, the Investment Committee shall satisfy that lending securities through SLB will be in the interest of the Policyholders. 2. The Board of Insurer shall amend its Investment Policy and put in place adequate Risk Management framework on SLBs covering circumstances for an early recall & rollover, treatment of corporate actions such as dividend, split, bonus, rights, merger, demerger etc. 4.3 INVESTMENT IN EQUITY SHARES THROUGH IPO44 1. The Board of the Insurers shall empower its Investment Committee to approve Investment in equities through IPOs, satisfying the above criteria. 43IRDA/F&I/CIR/INV/134/2013 Dt. 12th July 2013 44IRDA /CIR/INV/020/2008-09 Dt. 22nd Aug 2008 Investment – Master Circular Page 42 of 100 2. Investment Policy of the insurer shall have a detailed policy in respect of investment in IPOs and the investment team can take decision on day-to-day basis subject to compliance with the Policy. 3. Such investments shall be subject to periodical review, particularly as to ‘Approved’ status. 4.4 INVESTMENT IN MUTUAL FUND45 The Investment Committee of the Insurer shall lay down proper Guidelines for selection of Mutual Funds and schemes permissible including exposure Norms to a Single Mutual Fund and to each Scheme of Mutual Fund to avoid concentration. 4.5 INVESTMENT IN ALTERNATIVE INVESTMENT FUND46 1. The Investment Policy of the insurer shall lay down the policy to invest in Venture funds or Asset management Company, and the internal norms for such investments shall be decided by the investment committee (IC) of the Insurer. 4.6 EXPOSURE TO CREDIT DEFAULT SWAPS (CDS)47 1. The Board of the Insurer shall amend its Investment Policy and put in place necessary Risk Management Framework covering, inter alia, the following: i. Types of Assets on which Protection can be bought ii. Counterparties from whom CDS can be bought and limits on the counter parties iii. Valuation norms iv. Reporting and monitoring norms v. Stress testing on the capability of the counterparty to meet the obligation at periodic intervals vi. Margins applicable (Margins should be in cash or Govt. securities). Such margins collected should be not part of Investment Assets and Insurer should act as ‘trustee’ of such margins. vii. Settlement of MTM obligations viii. MIS, exception reporting ix. Necessary systems and controls prescribed for User in line with risk management architecture provided in the aforesaid RBI circular x. Review of the policy at periodic intervals in line with the Investment policy 2. Insurers shall enter into Master Agreement for CDS with counterparties as issued by FIMMDA. Such agreements may have additional clauses to suit the specific requirements of the Insurer provided such clauses 45IRDA/CIR/INV/020/2008-09 Dt. 22nd Aug 2008 46IRDA/CIR/INV/020/2008-09 Dt. 22nd Aug 2008, IRDA/F&I/Cir/INV/203/2011 Dt. 30th August, 2011 & IRDA/F&I/INV/CIR/054/03/2013 Dt. March 2013 47IRDA/INV /CIR/247/11/2012 Dt. 27th November 2012 Investment – Master Circular Page 43 of 100 are more stringent than the clauses prescribed by FIMMDA. The Investment Committee should review such additional clauses on continuous basis. 3. All CDS transactions shall be reported to the Investment Committee, Audit Committee on a quarterly periodicity. 4.7 OUTSOURCING OF INVESTMENT FUNCTION48 1. IRDAI (Investment) Regulations, 2016 makes it mandatory that NO part of Investment Function can be outsourced, as the same is a core function of the Insurance Business. 2. Engaging a specialist (not an entity falling under the Insurer’s Promoter Group) to provide reports on any class of investment or a specific investment in a purely advisory capacity will not be considered as outsourcing of a function of the Insurer, provided the Assets under Management (both Shareholders and Policyholders funds taken together) of the Insurer is not more than Rs.500 Crores or had not completed one year of operations from the date of Registration by issue of R3, whichever is earlier, subject to the following conditions: i. The Investment decisions are made within the Company with proper documentation within the delegated power as provided in the Investment Policy ii. Deal placement and execution are done by the Front Office personnel iii. Periodic reports to Management and Authority are drawn by the Company (in-house) iv. The Advisory fee to be paid to the Service provider is on a case-to-case basis and not on Net Asset Value 3. The Advisory fee shall: i. Not form part of NAV calculations in the case of ULIP business ii. Be paid out of Shareholders funds beyond Solvency Margin However any such arrangement may only be made with the prior approval of the Authority, giving full details of the same including any Agreement to be entered into, in this connection. 4.8 TRANSFER OF INVESTMENT49 1. Transfer from Shareholders’ Account to Policyholders’ Account: Transfer of funds from the Shareholders’ account to the policyholders’ account to meet the Deficit in the Policyholders’ account in a given financial year, made with the objective of meeting the deficit in the 48IRDA/INV/CIR/020/2008-09 Dt. 22nd Aug 2008 49IRDA/FA/02/10/2003-04 Dt. 29th Oct 2003 IRDA/INC/CIR/006/2003-04 Dt. 15th Dec 2003 IRDA/CIR/F&A/079/Feb-05 Dt. 25th Feb 2005 Investment – Master Circular Page 44 of 100 policyholders’ account, as and when made, should be as per the conservative approach, i.e., at the cost price or market price, whichever is lower. In case of Debt securities, all transfers are to be carried out at the lower of the market price and the net amortized cost. 2. Transfer between Policyholders’ Funds: No transfer of assets (investments) between different policyholders’ funds (between Participating and Non- Participating funds) shall be allowed. Also, no funds can be transferred between (1) Life Fund excluding Shareholders Funds (2) Pension & General Annuity Fund and (3) Unit Linked Funds 3. Purchase/sale transactions between Unit linked funds: Insurers may like to consider sale/purchase transactions between unit linked funds as part of investment management strategy, to limit transactions cost and also arising out of options exercised by the policyholders to shift between different unit linked funds. The sale/purchase of investments under such circumstances would be based on the market price of the investments, which are being shifted between unit-linked schemes. ALL such transactions should be made at a price as specified below: a. In case of equity, preference shares, ETFs and Government Securities market price of the latest trade. Deal should be entered into the system within one hour of taking such quote or price b. In case of securities mentioned in (a) if the trade has not taken place on the day of transfer and for all other securities not part of (a) previous day valuation price. 4. The Concurrent Auditor shall confirm that all transaction as said in point 3 above, have been done as per the time lines specified in point 3 above. 5. Funds of Non-linked business: It is reiterated that no sale/purchase is permitted between the various policyholders’ funds under the non-linked business 4.9 OTHER INVESTMENTS IN PENSION AND GROUP FUND Where a security, being part of ‘Approved Investment’, at the time of acquisition, subsequently, due to non- fulfilment of regulatory criteria for Approved Investments, becomes a part of ‘Other Investments’, the insurer, shall ensure such security is not continued to be part of the Pension and Group fund, within a period of 90 days. If the security continues to be ‘Other Investments’, after expiry of 90 days, the value of such security shall be made good by transfer to Shareholders funds, at amortized cost 4.10 TRANSACTIONS ON STOCK MARKETS TO BE ON CASH BASIS50 1. The Authority stipulates that all transactions entered into by insurers on the stock markets shall result in delivery. All insurers are required to place the contents of this Circular before their respective Boards and Investment 50IRDA/CIR/INV/062/JAN/05 Dt. 17th Jan 2005 Investment – Master Circular Page 45 of 100 Committees, and a copy of the duly certified resolution confirming the directive of the Authority is required to be filed with the Authority. 2. Further, all insurers are required to file a certificate of compliance to this effect on a quarterly basis. The Certificate is required to form part of FORM 5 of the Return on “Statement of Investment Reconciliation” filed by the insurers under the IRDA (Investment) Regulations, 2016. The Certificate of Compliance to be filed with the said Return now stands modified and shall henceforth read as under: 3. “Certified that all cash market transactions executed on the stock exchanges are only on delivery basis. Further certified that all information given herein is correct and complete to the best of my knowledge and belief and nothing has been concealed or suppressed.” 4.11 NEGOTIATED DEALING SYSTEM – ORDER MATCHING (NDS – OM)51 1. The Insurance Act, 1938 requires a Life Insurer to invest his Controlled funds as per Section 27A and a General Insurer to invest his Total Assets as per Section 27B in ‘Approved Investments’. The Act further requires a Life Insurer to hold not less than 50% and a General Insurer to hold a minimum of 30% in Approved Securities, which includes investment in Government of India Securities. 2. Reserve Bank of India, has operationalised Negotiated Dealing System – Order Matching (NDS-OM) Module from Aug, 2005 with the following broad features: i. The system is purely order driven with all orders being matched based on strict price / time priority. ii. The system is an anonymous order matching system wherein identify of parties are not revealed. The Clearing Corporation of India Limited (CCIL) will become the central counterparty to each trade done on the system. iii. The system allows straight- through processing (STP) and trades executed will flow straight to CCIL in a ready for settlement stage. iv. The system provides functionalities for order management (placing, modifying or cancelling orders), trade related queries, activity log, market information and analytics (YTM computation etc.) v. The system, presently, supports dealing in all Central Government and State Government securities for T+1 settlement. The system will be further upgraded later to facilitate trading in discounted instruments like Treasury Bills. 3. All secondary market trading in Government Securities shall be placed via NDS-OM only. 51IRDA/INV/CIR /029/2005-06 Dt. 21st Nov 2005 Investment – Master Circular Page 46 of 100 4.12 REPORTING OF OTC TRANSACTIONS IN CERTIFICATES OF DEPOSITS (CDs) AND COMMERCIAL PAPERS (CPs)52 1. In order to ensure transparency in secondary market transactions and obtain information on actual trades in CDs and CPs, which are money market instruments, all insurers are advised to report their OTC trades in CDs and CPs on the FIMMDA reporting platform. 2. Accordingly, beginning 1st August 2010, all IRDAI regulated entities shall report their OTC transactions in CDs and CPs on the FIMMDA reporting platform within 15 minutes of the trade for online dissemination of market information. Detailed procedure in this regard would be advised by FIMMDA. 4.13 ISSUE OF LONG TERM BONDS BY BANKS – FINANCING OF INFRASTRUCTURE AND AFFORDABLE HOUSING53 Investment Committee shall ensure to have robust mechanism on classification of such investment to qualify as Infrastructure or Housing Sector exposure considering predominant objectives of the offer. 4.14 REPORTING OF TRANSACTIONS IN CORPORATE BONDS, COMMERCIAL PAPERS, CERTIFICATE OF DEPOSITS & SECURITISED DEBT54 1. All Insurers to report their secondary market OTC trades in Corporate Bonds and Securitized Debt Instruments as per the reporting requirements on any of the stock exchanges (NSE, BSE and MCX-SX). These trades are to be cleared and settled through any of the clearing corporations (NSCCL, ICCL and MCX-SX CCL). 2. All Insurers to report their secondary market OTC trades in Commercial Papers and Certificate of Deposits as per the reporting requirements on FIMMDA (CBRICS) 4.15 ULIP FUND CLEARANCE PROCEDURE AND NAV PROCESS a. IRDAI ULIP Fund Clearance Procedure 1. All Life Insurers shall get their new ‘Fund(s)’ cleared by the Investment Department of IRDAI. For every new product filed with IRDAI, as a part of File & Use, the Life Insurer shall in “duplicate” file with IRDAI, the Certificate signed by the Appointed Actuary (AA), Chief Investment Officer (CIO) Chief Risk Officer (CRO)and Chief Financial Officer (CFO) along with the following: 52IRDA/F&I/CIR/INV/115/07/2010 Dt. 21st July 2010 53IRDA/F&I/CIR/INV/213/09/2014 Dt. 12th Sep 2014 54IRDA/F&I/CIR/INV/099/03/2014 Dt. 28th Mar 2014 Investment – Master Circular Page 47 of 100 i. ‘Investment Policy’ of each segregated fund as part of file & use procedure, under Section 8.1 of Form IRDAI-Life-Linked-NP. The Appointed Actuary shall, as a part of the product filing, confirm that the Investment policy fully complies with IRDAI (Investment) Regulations, Circulars and Guidelines issued there under. ii. SFIN shall be derived following the procedure mentioned below: No Fund Category Procedure for ‘SFIN’ 1 Unit Linked Individual Funds <ULIF>+<001>+<ddmmyy>+<FundName>+<Reg.No> 2 Unit Linked Group Funds <ULGF>+<001>+<ddmmyy>+<Fund Name>+<Reg.No> Note: Explanation to ‘Procedure for SFIN’ a. The 1st four Character of SFIN denote the Category to which the Fund belongs b. 001 denote the 1st fund in the particular Category c. ddmmyy refers to the date of launch of fund d. Fund Name denotes the Name of the fund, which shall be abbreviated to 10 Characters iii. The insurer shall confirm that the SFIN is unique and has not been allotted to any other segregated fund. iv. Reg. No is the Registration Number of the Insurer and other details as required in Format 1 for the new fund to be launched. If any “group of cat code head” as a permissible asset class is subsequently added / removed by the Authority, the insurer shall separately file the same for IRDAI’s prior clearance, for ‘each’ fund where the “group of cat code head” would be offered. v. While filing the information mentioned in point 4.15(a)(1) above the Appointed Actuary (AA), Chief Investment Officer (CIO), Chief Financial Officer (CFO) and the Chief Risk Officer (CRO) shall certify the following: 1. The ‘Segregated Fund’, by whatever name called, would invest only in the ‘exhaustive’ Categories of Investments permitted under guidelines issued under IRDAI (Investment) Regulations, 2016 2. The Investments to be made as per the Investment Policy, as specified in Section 8.1 of Form IRDAI- Life-Linked-NP, of File & Use procedure] would be covered in the Standard Operating Procedure (SOP), approved by the Investment Committee of the Insurer and followed by the Investment Department of the Insurer, before the launch of the fund, if existing SOP does not cover the new asset class, if any. The ‘Segregated fund’ would have identifiable, individual ‘Scrips’, grouped as per guidelines issued by IRDAI and the same would be identifiable at custodian level, by a separate sub code, for such ‘Segregated Fund. 2. Other Conditions: a. No individual security is earmarked between two or more ‘segregated fund’ Investment – Master Circular Page 48 of 100 b. The New Fund offered by the Insurer shall not be a minor modification of any of its existing Fund. c. The name of the Fund shall not be misleading and shall not contain word(s) that can convey an impression incongruous to the objective of the Fund. d. Each ‘Segregated Fund’ would have a ‘single’ NAV, declared on a ‘day-to-day’ basis and uploaded in the Insurer’s Public Domain and in the Life Insurance Council Website e. The insurer, through a portal, would enable the policyholder to know, through a secured login (i) the value of policy wise units held by him, as per FORM D02 and (ii) fund wise NAV (SFIN wise) on both the Insurer’s website and life council website on the same day f. The Insurer, as a part of product brochure, had included the disclosure mandated under FORM D02 and would provide the secured login details to Policyholders along with the Policy document g. The ‘Units’ would be created on a ‘day-to-day’ basis and would be backed by Investment assets, for the ‘segregated fund’ h. The Investment Trial Balance, in respect of each ‘Segregated Fund’ [with clear link to SFIN] shall be generated through the system. i. All prudential and Exposure norms as per Regulation 9 of IRDAI (Investment) Regulations, 2016 amended from time to time shall be complied at each 'segregated' fund, as well as at Assets under Management (AUM) of ULIP. j. Fund Management Charges (FMC) is identified with respect to each ‘segregate fund’ and not otherwise. k. Transfer of funds between ULIP funds shall be done as per the norms laid in point 4.8 (3) of the Master Circular. The Concurrent Auditor shall certify that the Insurer has the required automated System in place to ensure compliance of this requirement. l. The SFIN would be quoted in all ‘Fund’ related filing / disclosure. Also SFIN would be mentioned in all documents and all fund-wise information provided to policyholders, other users (public, distribution channels and others) and on all returns or fund related correspondence with the Authority m. The Insurer shall file a certificate issued by the Chartered Accountant appointed for certification of Systems and Process in place as per the Guidance Note issued in “Investment Risk Management Systems and Process of Insurance Companies” by The Institute of Chartered Accountants of India. The latest copy of such certificate shall be filed along with the product filed for approval, as a part of file & use. 3. All records in this regard shall be made available for the inspection by IRDAI at any point of time. Investment – Master Circular Page 49 of 100 b. NAV Process 1. The NAV Process to be followed for new and existing funds and Systems and Process should be in place for calculation of NAV for ‘each’ Segregated Fund. 2. The objective of defining the ‘Net Asset Value (NAV) Process’ for the ULIP Funds, is to standardise the process to be followed by all Life Insurers in arriving at the NAV per Unit. Every Insurer in computing and declaring the NAV shall follow the below mention procedure consistently A. Methodology of operating ‘Segregated Fund’ B. ‘Units’ creation / Redemption C. Preparation of Daily cash flow statement D. Security Master Creation E. Primary Market deals / IPO F. Secondary Market Debt / Equity deal authorization G. Settlement Process H. Banking Transaction I. Corporate Actions J. Valuation Process K. Charges L. NAV Computation 3. In this regard the Investment Committee of the insurer shall amend the Standard Operating Procedure (SOP) to include clear internal guidelines, process flow charts, procedures and responsibilities to be followed by the insurer. The following are the minimum set of guidelines to be adhered in this regard: A. Methodology of Operating ‘Segregated Fund’ 1. Regulation 3(w) of IRDAI (Unit Linked Insurance Products) Regulations, 2019 defines ‘Segregated Funds’ as ‘Funds earmarked in respect of Linked Business’. 2. To comply with the above requirements of ‘Segregated Fund’, the Insurer shall adopt the following procedure to ensure strict segregation of funds and computation of NAV: a. The Insurer shall, shall open separate bank account and account with the Custodian for each “segregated fund”. b. The Bank shall be directed to allot an Account Number/Account Name with specific reference to the particular "Segregated Fund" so as to match the 10 digit fund name of the SFIN. c. Every Purchase, Sale of Investment, Income on Investment (including Corporate Action) shall be identified with reference to the particular ‘Segregated Fund’ and accounted for. Investment – Master Circular Page 50 of 100 d. Every ‘Deal Slip’ shall be identified with reference to the ‘segregated fund’ along with ‘Segregated Fund Identification Number “SFIN” for such Segregated Fund(s) and the respective ‘sub-code’ of Custodian and the respective Bank Account. 3. Passive breach of regulatory limits, under any fund [SFIN] on any day, if corrected within three business days, ALL such corrective actions taken shall be reported by the Concurrent Auditor to the Audit Committee B. Units Creation / Redemption Unit capital movement tracks the capital movement (subscription and redemption) in the funds and requires reconciliation with Policy Admin System (PAS), which requires a. Daily Report of ‘Subscription & Redemptions’ received from the Policy Admin System (PAS) to be uploaded [without manual intervention through process integration] in the Investment Accounting System b. Unit Report shall be reconciled with the Investment Accounting System’s Creation / Redemption Report, after booking of unit capital entries c. Units created on a ‘day-to-day’ basis (including switches), shall be backed by ‘segregated fund wise’ Investment assets. In other words, the value / amount for which Units are created for the particular day (at the prevailing NAV, applicable for the day, of the respective fund), should be equivalent to the premium receipt (net of switches) less applicable charges and other outflows such as benefits paid, surrenders and foreclosures in excluding applicable charges of the ‘respective segregated fund’. C. Preparation of Daily Cash Flow Statement The insurer shall prepare a cash flow statement for each ‘Segregated Fund’ on a day-to-day basis to ascertain the ‘investible funds’. The preparation of the cash flow statement shall take into account the following: 1. Opening Bank balance at the Start of the Day (Closing Balance of the Previous Day) 2. Receipt on account of Sale of Investments 3. Receipt on account of Redemption of investment or Maturity of investments (Gross) 4. Receipt of Interest or Dividend etc., 5. Payments on account of purchase of Security 6. Payments on account of Application Money 7. Premiums received net of charges and redemptions 8. Any other receipts or payments pertaining to investments D. Security Master Creation 1. Equity Investments Based on the inputs from treasury the investment back-office shall create Security Masters in the system (linked via NSE/BSE codes) and the same shall be validated by the Mid-Office. The procedure includes documentation of supporting and supervisory sign off Investment – Master Circular Page 51 of 100 2. Debt Investments Security masters for debt Instruments are prepared on the basis of Information memorandum in case of primary and secondary market deals by the Back Office. The procedure includes documentation of supporting and supervisory sign off. E. Primary Market Deals / IPO 1. Booking of Primary Market Deals - Debt Primary Market Deals shall be booked on the date of application and on the date of allotment the Securities will be reflected in the Investment Accounts 2. Booking of Equity IPO Equity Investments shall be accounted on the date of application for IPO Issue as ‘Application Money’ at the segregate Fund Level and on the date of allotment the allotted Shares shall be reflected in the Investment accounts in the same proportion of application money. F. Secondary Market Debt / Equity Deal Authorization 1. Debt Deals All Debt securities as categorised in Guidelines on Categories of Investments, as amended from time to time, shall be executed with counterparties and reported on NSE / BSE / FIMMDA reporting platform and the same shall be confirmed with counterparties. The deals shall be authorised in the investment system and the trade files / information shall be sent to custodian / other online settlement systems as recognised by any financial regulator for settlement. 2. Equity Deals a. STP (Straight Through Process) Reconciliation: All Secondary Market equity deals shall be put through the STP module in the investment system. The dealer shall put through the deal in the investment system after concluding the transaction. The deal would then flow to the back office which would be compared with the input details and the STP file received from broker. If all details match, the transaction would be authorised in the system for settlement. b. Custodian /Broker settlement: After STP reconciliation the equity trade files ISO files shall be sent to custodian and broker houses through STP. All deals shall be recorded on trade date accounting basis. G. Settlement Process As specified by SEBI / Clearing Houses. Investment – Master Circular Page 52 of 100 H. Banking Transactions 1. Coupon Payments for Debt Investments Interest receipt entries shall be passed in Bank (Reconciled with Custodian Corporate Actions Report / other online settlement systems as recognised by any financial regulator) 2. Redemptions/Maturities for Debt Investments Redemptions/Maturity receipt entries shall be passed in bank account (Reconciled with Custody Corporate Actions report). 3. Dividend Receipts for Equity Investments Dividend receivables shall be received in bank on the receipt date (Reconciled with Corporate Action Report received from the Custodian or other online settlement systems as recognised by any financial regulator) 4. Management Fees Payment entries pertaining to Management fee transfer to Non-Linked Funds shall be passed in Bank accounts on respective payment dates. 5. Booking of Application Money Application Money shall be booked in current asset account on the date of payment of application money towards prospective investments. I. Corporate Actions 1. Equity The insurer shall obtain details of corporate action from exchange(s) on which the stock is listed or custodian or any service provider who disseminates such information. While the information pertaining to corporate actions may be obtained from any service provider, it may be noted that it is duty of the insurer to have adequate internal controls in place to ensure that all corporate actions are duly acted upon. 2. Debt The insurer shall configure their Investment System for details of interest receivable and redemption dates. Further, details of interest receivable and redemption can also be obtained from the custodian / other online settlement systems as recognised by any financial regulator. 3. Accounting of coupon payments, redemption / maturities for debt investments shall be automatically triggered by the system, based on the interest payment dates and maturity dates defined in the security masters created for ‘each’ security. J. Valuation Process 1. Valuation of securities shall be in line with Annexure II of Master Circular – Investments 2. The Insurer shall close the Investment Front Office system for transactions at 6.00 PM. The Concurrent Auditor shall confirm the compliance of this requirement in their quarterly report to the Board of Directors K. Charges: 1. Fund Management Charges Investment – Master Circular Page 53 of 100 Fund Management Charges (FMC) including GST shall be ‘accounted’ for on a day-to-day basis in the investment accounting system. The actual transfer to “UL-Non-Unit Reserve or Non-Linked Funds” account of accumulated FMC shall be done at least monthly or at lesser frequency 2. FMC charged on the segregated fund [SFIN], where investment is made in Mutual funds and Exchange Traded Fund, permitted by IRDAI, shall be subject to: a. The FMC levied shall be the FMC as per the F&U of the segregated fund (SFIN) reduced by FMC charged by the Mutual Fund / Exchange Traded Fund b. Point (a) above, shall be permitted provided; the insurer has a fully Automated System to compute the differential FMC as detailed in point (a) above. c. The Concurrent Auditor shall certify the Systems in place, to comply with the requirement of this provision, before the Insurer could avail this provision 3. Dealing costs Dealing costs securities transaction tax and service tax shall be adjusted in the cost of investments L. NAV Computation 1. NAV: The NAV of the Segregated FUND [SFIN] shall be computed as: Market Value of investment held by the fund + Value of Current Assets – Value of Current Liabilities & Provisions, if any Number of Units existing on Valuation Date (before creation / redemption of Units) 2. The NAV computed as above, in respect of ‘each’ Segregated Fund, shall be Audited by the Concurrent Auditor on a day-to-day basis. 3. The NAV calculated as above, in respect of ‘each’ Segregated fund, shall be declared on the Insurer’s Website and at the Life Insurers Council Website, as and when the same is ready. The following notes shall be considered for the computation of NAV a. Market value of investment, held by the fund shall be as explained above in the valuation of investments section and the same netted off for FMC b. Value of Current Assets represents Accrued interest, Dividend Receivable, Bank Balance, Receivable for Sale of Investments and Other Current Assets (for Investments) c. Value of current liabilities represents Payable for Investments d. Number of units derived from the investment accounting system shall be reconciled on a day to day basis with the policy admin system e. Provisions shall include expenses for brokerage and transaction cost, NPA, Fund Management Charges (FMC) and any other charges approved by the Authority 4. Specifying SFIN in short message services (SMS), tele-callings, radio messages and ATM display Investment – Master Circular Page 54 of 100 It is clarified that, SFIN need not be displayed in fund related communication through SMS, tele-calling, radio messages and ATM display due to technology limitations. It would be full compliance of IRDAI’s direction, if Insurers specify SFIN in all documents and all fund-wise information provided to policyholders and other users 5. Segregated funds having multiple plans, with different FMCs attached to it or running ‘Funds of Funds’ structure As each ‘Segregated Fund’ is required to have a ‘single’ NAV, declared on a ‘day-to-day’ basis and FMC is required to be identified to each segregated fund, all Insurers are required to convert various plans offered below a fund or funds of funds structure, as individual segregated fund with a SFIN with identified ‘scrips’ representing the investments of such segregated funds. In doing so, the net asset value (NAV) of each plan shall be segregated from the underlying fund. The Internal / Concurrent Auditor shall certify that such segregation had not resulted in enrichment of one set of policyholders from others due to change in the units or the NAV. The implication, to the policyholder of such change, if any, shall be put on the insurer’s website, along with the rationale of making such change. The concurrent Auditor shall confirm the Insurer’s adherence to these requirements. 6. Assigning SFIN for ‘new’ funds launched The Authority had mandated to specify the date of launch for each new Segregated Fund in the File & Use procedure. In this connection it is clarified that the date refers to the date on which such product is filed with IRDAI. 7. Operating CSGL / CBLO Account As RBI do not permit Banks to open multiple CSGL / SGL accounts against single entity the Insurers are permitted to operate with a single CSGL /SGL Account and allocate the holdings in their books to each Segregated Fund [SFIN]. All insurers are required to reconcile their Government Securities holding across all segregated funds on a day to day basis. Similarly as CCIL permits opening only one CBLO Account for every company, the Insurers are hereby permitted to have a common CBLO Account at company level, and reconcile their holdings in CBLO, segregated fund wise, on a day to day basis. The Internal / Concurrent Auditor, in his Audit Report to the Audit Committee of the Insurer’s Board shall confirm that the Insurer had done the reconciliation of G Sec and CBLO holding, segregated fund wise [SFIN] on a day- to-day basis. 8. Usage of valuation matrix published by FIMMDA The guiding principle shall be to follow, for all instruments, the day-to-day valuation matrix published by FIMMDA and where ever FIMMDA does not provide such valuation matrix on a day to day basis, the Insurer may adopt Investment – Master Circular Page 55 of 100 valuation matrix provided by any SEBI registered Rating Agency, till such time FIMMDA comes out with such valuation matrix and provides the same in the technology platform, as mandated by the Authority in eliminating manual intervention. The Concurrent Auditor shall certify in his Audit Report to the Board that the Insurer had consistently adopted the methodology prescribed above during the audit period. 4.16 IMPLEMENTING RFQ PLATFORM FOR INVESTMENTS IN CORPORATE BONDS / COMMERCIAL PAPERS55 1. With a view to enhance and coalescing the fragmented liquidity in Corporate Bonds, SEBI has implemented Request for Quote (RFQ) Platform through Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The RFQ platform seeks to replicate the OTC market albeit on an electronic platform in a move to bring more transparency, centralization in protecting investor interest apart from having enough liquidity in Secondary Market. 2. To achieve the above, SEBI, vide Circular: SEBI/HO/IMD/DF3/CIR/P/2020/130 Dated 22nd July, 2020 has mandated all Mutual Funds (MFs) to undertake 10% of their total Secondary Market trades of Corporates Bonds through RFQ to start with. As this is likely to bring transparency and liquidity in the Corporate Bond segment, the Authority, in consultation with the Life and General Insurance Councils directs all Insurers as follows: a. On monthly basis, the Insurers shall undertake at least 10% of their total Secondary Market trades in the Corporate Bonds in Value place / seek Quotes through one-to-many mode on RFQ platform available on BSE/NSE. The 10% limit shall be reckoned on the average of Secondary Market Trades by Value, in the immediately preceding 3 months on rolling basis. b. Concurrent Auditor of the Insurer in his Quarterly Audit Report shall confirm that the Insurer has complied with the directions of this Circular. 3. The above procedure will be followed by all Insurers with effect from 1st Nov, 2020. 4.17 CONTROL & MONITORING MECHANISM OF INVESTMENT OPERATIONS – WORK FROM REMOTE LOCATION56 With response to the IRDAI communication Dt. 28th April, 2021 on Work from Remote Location, the Insurers have provided feedback on the status of minimum Cyber Security Controls put in place by the Insurers. A scrutiny of the feedback showed inconsistency in controls & monitoring of work from remote location. In this regard, the Insurers are advised as follows: 55 IRDAI/F&I/CIR/INV/246/09/2020 Dt. 25th Sep, 2020 56 IRDAI/INV/001/2021 Dt.18th June, 2021 Investment – Master Circular Page 56 of 100 1. Insurers shall have in place prudent cyber security norms, proper systems and controls while allowing/continuing conduct of Investment Operations from remote location. 2. These systems and controls should take care of Data Privacy, Security and Confidentiality, possibility of Cyber-Attacks, Hackings, Malware Infections, Disruption Risks, Recording of Deals and Supervisory Controls of the dealing activities. Investment – Master Circular Page 57 of 100 5. DISCLOSURES AND REPORTING NORMS 5.1 REPO, REVERSE REPO IN GOVERNMENT SECURITIES AND CORPORATE DEBT SECURITIES The following disclosures should be made by the Insurers in the Notes on Annual Accounts to the balance sheet: Particulars Minimum outstanding during the year Maximum outstanding during the year Daily average outstanding during the year Outstanding as on March 31 Securities Sold under repo 1. Government Securities 2. Corporate Debt Securities Securities purchased under reverse repo 1. Government Securities 2. Corporate Debt Securities 5.2 SECURITIES LENDING AND BORROWING FRAMEWORK57 1. The securities lent shall continue to be shown in Form 5 as they were shown prior to SLB transaction. Income earned on lending securities shall be shown in the CAT Code that is applicable as it appears in Form 1. The Securities which are lent through SLB and are not held in custody shall be shown in Form 6 under the column ‘others’ along with a reconciliation statement with the following details (to be part of FORM 6 and filed as a part of periodical returns): a. Name of the scrip b. No. of securities lent c. Name of the fund d. Maximum limit permissible in such fund based on the total quantity held e. Stock Exchange f. Date of expiry of the contract g. Value of the securities lent as on the date 57IRDA/F&I/CIR/INV/134/2013 Dt. 12th July 2013 Investment – Master Circular Page 58 of 100 5.3 INVESTMENT IN CREDIT DEFAULT SWAPS58 Insurer shall file quarterly report on the CDS transactions in the format prescribed below: Name of the Insurer Quarter - Year 1. Details of CDS, counter party wise No Name of the Counter Party Tenor of CDS FV of the underlying Tenor of the underlying Notional Amount Spread (bps) Net Position Margin Held 2. Details of CDS, reference entity wise No Name of the reference entity Tenor of CDS FV of the underlying Tenor of the underlying Notional Amount Spread (bps) Net Position Margin Held Approved/ Other Inv. 3. Details of reference assets wherein credit event occurred and status of fulfillment of commitment by the Market Maker. 5.4 EXPOSURE TO INTEREST RATE DERIVATIVES59 1. The presentation in the financial statements and disclosures are governed by AS 31 and 32 issued by ICAI. In specific, the Insurer have to make the following disclosures in the Financial statements: i. Description of Participant’s financial risk management objective and policies, in particular its policy for hedging forecasted transactions. ii. Hedging strategy. iii. Accounting Policy for Derivatives. iv. Nature and terms of outstanding Interest Rate derivative contracts. v. Quantification of the losses which would be incurred if counter-parties failed to fulfil their obligation under the outstanding Interest Rate derivative contracts. 2. Quarterly report shall be submitted to the Authority as per Annexure A, if the Insurer undertakes any Interest Rate Derivatives 58IRDA/INV /CIR/247/11/2012 Dt. 27th November 2012 59IRDA/F&I/INV/CIR/138/06/2014 Dt. 11th June 2014 Annexure A Name of the Insurer Quarter- Year 1) Details of Rupee Interest Rate Derivatives, Counter party wise No Name of the Counter- party Nature of the derivative contract (FRA/ IRS/ IRF) Tenor of derivative contract Notional Amount of the derivative contract Mark to Market (Profit /loss) Unsettled MTM (Profit /loss) Nature of underlying Tenor of the underlying Face Value of the underlying , if applicable Hedge Designation (Cash-flow / Reinvestme nt / interest income receivable) PV01 of the Underlying being hedged (bps) PV01 of the derivative (bps) 2) Counterparty-wise Credit Exposure to Derivative Transactions: No. Counterparty Notional Value of Outstanding Derivative contracts Current Credit Exposure Potential Future Credit Exposure Value of Collateral CSA posting limit Type of Collateral Investment – Master Circular Page 60 of 100 3) Fund wise Notional Value of Outstanding derivative transactions and the Book Value of investments Fund Name Notional outstanding derivative transactions Expected Cash Flows on underwritten Insurance Contracts Book Value of investments Percentage of Notional outstanding on the Book Value of Investments Remarks Total 4) Benchmark-wise derivative activity during the quarter : No. Nature of the derivative contract Benchmark Notional Amount of derivative contracts Outstanding at the beginning of the quarter Fresh derivative contracts/ positions taken during the quarter Derivative contracts/ positions terminated/ matured/ expired during the quarter Notional Amount of derivative contracts Outstanding at the end of the quarter FRA MIBOR/ OIS FRA INBMK IRS MIBOR/ OIS IRS INBMK IRF GOI 5.5 ISSUE OF LONG TERM BONDS BY BANKS – FINANCING OF INFRASTRUCTURE AND AFFORDABLE HOUSING60 While preparing Exposure to Industry sector i.e. Form 4A- Part D, the Investments under ILBI and IOLB shall be classified under’ Infrastructure - Long Term Bonds –BFSI’ and HLBH and HOLB shall be classified under ‘Housing – Long Term Bonds- BFSI’ 5.6 ULIP PERIODICAL DISCLOSURE 1. Every life Insurer shall at least on a monthly periodicity, on or before the 5th of the succeeding month, make the following portfolio disclosures [SFIN wise]in the Insurers website: a. Name of the fund b. SFIN Number c. Investment Objective of the Fund d. NAV as on the last business day of the month e. All NAV shall be upto 4 decimals f. AUM of Equity and Debt as on the last business day of the month g. Benchmark as approved by the Investment Committee h. Name of the Fund Manager i. Number of Funds managed by Fund Manager (in point ‘g’ above) along with details of Equity, Debt and Balanced Funds j. Asset Allocation provided in Product document (as per file & use procedure) and percentage of Actual Asset Allocation at the end of the respective month k. Rating Profile of Debt Instruments l. Modified Duration of the Debt and Money Market Instruments m. Exposure of SFIN (debt and equity) to top 10 industrial sectors as defined under National Industrial Classification 2008 and balance exposure to be shown under “others” n. Performance of the fund over different period over 1 month, 6 months, 1 year, 2 year,3 year and since inception along with the performance against the Benchmark index for the corresponding period. Returns less than or upto 1 year, shall be based on absolute returns o. The TOP 10 holdings under each Asset Category of G .Sec, Corporate Debt and Equity shall be disclosed. The exposure to the Money Market instruments to be disclosed as a consolidated amount and as percentage to AUM of the SFIN p. The Debt and Equity holdings shall be disclosed as a percentage to the AUM of the SFIN in the statement of portfolio. The total percentage of holdings shall be totalled to 100% of the AUM of the SFIN 2. The Concurrent Auditor shall, in his Audit Report, confirm compliance to the above points. 60IRDA/F&I/CIR/INV/213/09/2014 Dt. 12th Sep 2014 Page 62 of 100 5.7 EXPOSURE TO COMPANIES PARTICIPATING IN JLF Insurers shall file, along with Quarterly Periodical Returns to IRDAI the information, as under. Also, Insurers shall make necessary disclosure in Notes to Accounts of Financial Statements. No Name of the Entity Date of Insurers entry into JLF Exposure as on the date of Insurers entry into JLF Additional Exposure as decided in JLF % of exposure in excess of IRDAI (Inv) Regulations Date of Approval by the Insurers Board Comments of Board on Additional Exposure permitted Page 63 of 100 6. FUND CLEARANCE FORMATS & INVESTMENT CATEGORY CODES 6.1 Asset Categories Sheet: a. For Existing Segregated Funds FORMAT 1 INVESTMENTS MADE - EXISTING SEGREGATED FUND Name of the Fund: No INVESTMENT CATEGORY HEADS CAT CODE SFIN No: …………………… …………………… ……. Ass et Cate gory Nam e as per F&U (Act urial ) IRDA Approval Ref No: Date of Launch of Fund dd/mm/yy Amount (Rs. Crores) A CENTRAL GOVT. SECURITIES A01 Central Government Bonds CGSB A02 Special Deposits CSPD A03 Deposit under Section 7 of Insurance Act, 1938 CDSS A04 Treasury Bills CTRB B CENTRAL GOVT. SEC, STATE GOVT OR OTHER APPROVED SECURITIES B01 Central Government Guaranteed Loans / Bonds CGSL B02 State Government Bonds SGGB B03 State Government Guaranteed Loans SGGL B04 Other Approved Securities (excluding Infrastructure Investments) SGOA B05 Guaranteed Equity SGGE C (a) HOUSING & LOANS TO STATE GOVT FOR HOUSING / FFE C01 Loans to State Government for Housing HLSH C02 Loans to State Government for Fire Fighting Equipment HLSF C03 Term Loan - HUDCO / NHB / Institutions accredited by NHB HTLH C04 Commercial Papers - NHB / Institutions accredited by NHB HTLN Page 64 of 100 C05 Housing - Securitised Assets HMBS C06 Debentures/Bonds/CPs/Loans - Promoter Group HDPG C07 Long Term Bank Bonds Approved Investment - Affordable Housing HLBH TAXABLE BONDS C08 Bonds / Debentures issued by HUDCO HTHD C09 Bonds / Debentures issued by NHB / Institutions accredited by NHB HTDN C10 Bonds / Debentures issued by Authority constituted under any Housing / Building Scheme approved by Central / State / any Authority or Body constituted by Central / State Act HTDA TAX FREE BONDS C11 Bonds / Debentures issued by HUDCO HFHD C12 Bonds / Debentures issued by NHB / Institutions accredited by NHB HFDN C13 Bonds / Debentures issued by Authority constituted under any Housing / Building Scheme approved by Central / State / any Authority or Body constituted by Central / State Act HFDA (b) OTHER INVESTMENTS (HOUSING) C14 Debentures / Bonds / CPs / Loans HODS C15 Housing - Securitised Assets HOMB C16 Debentures / Bonds / CPs / Loans - (Promoter Group) HOPG C17 Long Term Bank Bonds Other Investment– Affordable Housing HOLB C18 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) HORD (c) INFRASTRUCTURE INVESTMENTS C19 Infrastructure - Other Approved Securities ISAS C20 Infrastructure - PSU - Equity shares - Quoted ITPE C21 Infrastructure - Corporate Securities - Equity shares-Quoted ITCE C22 Infrastructure - Equity (Promoter Group) IEPG C23 Infrastructure - Securitised Assets IESA C24 Infrastructure - Debentures / Bonds / CPs / loans - (Promoter Group) IDPG C25 Infrastructure - Infrastructure Development Fund IDDF Page 65 of 100 (IDF) C26 Onshore Rupee Bonds issued by ADB and IFC (Infrastructure- approved) IORB C27 Long Term Bank Bonds Approved Investment– Infrastructure ILBI C28 Infrastructure Investments rated not less than “A” along with Rating of “EL1” IELB C29 Debt Instruments of InvITs - Approved Investments IDIT TAXABLE BONDS C30 Infrastructure - PSU - Debentures / Bonds IPTD C31 Infrastructure - PSU - CPs IPCP C32 Infrastructure - Other Corporate Securities - Debentures/ Bonds ICTD C33 Infrastructure - Other Corporate Securities - CPs ICCP C34 Infrastructure - Term Loans (with Charge) ILWC TAX FREE BONDS C35 Infrastructure - PSU - Debentures / Bonds IPFD C36 Infrastructure - Other Corporate Securities - Debentures/ Bonds ICFD (d) INFRASTRUCTURE - OTHER INVESTMENTS C37 Infrastructure - Equity (including unlisted) IOEQ C38 Infrastructure - Debentures / Bonds / CPs / loans IODS C39 Infrastructure - Securitised Assets IOSA C40 Infrastructure - Equity (Promoter Group) IOPE C41 Infrastructure - Debentures / Bonds / CPs / loans - (Promoter Group) IOPD C42 Onshore Rupee Bonds issued by ADB and IFC (Infrastructure- others) IOOB C43 Long Term Bank Bonds Other Investment– Infrastructure IOLB C44 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) IORD C45 Reclassified Approved Investments - Equity (Point 6 under Note for Regulation 4 to 9) IORE C46 Infrastructure Investment below “A” or “EL1” IOEL C47 Debt Instruments of InvITs - Other Investments IOIT D APPROVED INVESTMENT SUBJECT TO Page 66 of 100 EXPOSURE NORMS D01 PSU - Equity shares - Quoted EAEQ D02 Corporate Securities - Equity shares (Ordinary)- Quoted EACE D03 Equity Shares - Companies incorporated outside India (invested prior to IRDA Regulations) EFES D04 Equity Shares - Promoter Group EEPG D05 Corporate Securities - Bonds - (Taxable) EPBT D06 Corporate Securities - Bonds - (Tax Free) EPBF D07 Corporate Securities - Preference Shares EPNQ D08 Corporate Securities - Investment in Subsidiaries ECIS D09 Corporate Securities - Debentures ECOS D10 Corporate Securities - Debentures / Bonds/ CPs /Loan - (Promoter Group) EDPG D11 Municipal Bonds - Rated EMUN D12 Investment properties - Immovable EINP D13 Loans - Policy Loans ELPL D14 Loans - Secured Loans - Mortgage of Property in India (Term Loan) ELMI D15 Loans - Secured Loans - Mortgage of Property outside India (Term Loan) ELMO D16 Deposits - Deposit with Scheduled Banks, FIs (incl. Bank Balance awaiting Investment), CCIL, RBI ECDB D17 Deposits - CDs with Scheduled Banks EDCD D18 Deposits - Repo / Reverse Repo – Govt. Securities ECMR D19 Deposits - Repo / Reverse Repo - Corporate Securities ECCR D20 Deposit with Primary Dealers duly recognised by Reserve Bank of India EDPD D21 CCIL - CBLO ECBO D22 Commercial Papers ECCP D23 Application Money ECAM D24 Perpetual Debt Instruments of Tier I & II Capital issued by PSU Banks EUPD D25 Perpetual Debt Instruments of Tier I & II Capital issued by Non-PSU Banks EPPD D26 Perpetual Non-Cum. P.Shares & Redeemable Cumulative P.Shares of Tier 1 & 2 Capital issued EUPS Page 67 of 100 by PSU Banks D27 Perpetual Non-Cum. P.Shares & Redeemable Cumulative P.Shares of Tier 1 & 2 Capital issued by Non-PSU Banks EPPS D28 Foreign Debt Securities (invested prior to IRDA Regulations) EFDS D29 Mutual Funds - Gilt / G Sec / Liquid Schemes EGMF D30 Mutual Funds - (under Insurer's Promoter Group) EMPG D31 Net Current Assets (Only in respect of ULIP Fund Business) ENCA D32 Passively Managed Equity ETF (Non Promoter Group) EETF D33 Passively Managed Equity ETF (Promoter Group) EETP D34 Onshore Rupee Bonds issued by ADB and IFC EORB D35 Debt Capital Instruments (DCI-Basel III) EDCI D36 Redeemable Non-cumulative Preference Shares (RNCPS- Basel III) ERNP D37 Redeemable Cumulative Preference Shares (RCPS- Basel III) ERCP D38 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [PSU Banks] EAPS D39 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [Private Banks] EAPB D40 Units of Real Estate Investment Trust (REITs) ERIT D41 Units of Infrastructure Investment Trust EIIT D42 Debt ETFs - "Approved Investments" EDTF D43 Debt Instruments of REITs - Approved Investments EDRT E OTHER INVESTMENTS E01 Bonds - PSU - Taxable OBPT E02 Bonds - PSU - Tax Free OBPF E03 Equity Shares (incl Co-op Societies) OESH E04 Equity Shares (PSUs & Unlisted) OEPU E05 Equity Shares - Promoter Group OEPG E06 Debentures OLDB E07 Debentures / Bonds/ CPs / Loans etc. - (Promoter Group) ODPG E08 Municipal Bonds OMUN Page 68 of 100 E09 Commercial Papers OACP E10 Preference Shares OPSH E11 SEBI approved Alternate Investment Fund (Category I) OAFA E12 SEBI approved Alternate Investment Fund (Category II) OAFB E13 Short term Loans (Unsecured Deposits) OSLU E14 Term Loans (without Charge) OTLW E15 Mutual Funds - Debt / Income / Serial Plans / Liquid Schemes OMGS E16 Mutual Funds - (under Insurer's Promoter Group) OMPG E17 Securitised Assets OPSA E18 Investment properties - Immovable OIPI E19 Passively Managed Equity ETF (Non Promoter Group) OETF E20 Passively Managed Equity ETF (Promoter Group) OETP E21 Onshore Rupee Bonds issued by ADB and IFC OORB E22 Debt Capital Instruments (DCI-Basel III) ODCI E23 Redeemable Non-cumulative Preference Shares (RNCPS - Basel III) ORNP E24 Redeemable Cumulative Preference Shares (RCPS - Basel III) ORCP E25 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) ORAD E26 Reclassified Approved Investments - Equity (Point 6 under Note for Regulation 4 to 9) ORAE E27 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [PSU Banks] OAPS E28 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [Private Banks] OAPB E29 Units of Real Estate Investment Trust (REITs) ORIT E30 Units of Infrastructure Investment Trust OIIT E31 Debt ETFs - "Other Investments" ODTF E32 Debt Instruments of REITs - Other Investments ODRT Fund Total NAV as on reporting date Page 69 of 100 Asset Category % Range (as per F&U - Actuarial) Actual % From To Equity Debt Money Market Instruments Date: Appointed Actuary Chief Investment Officer Chief Risk Officer Chief Finance Officer Note: 1. The Amount reported above shall be as reported in Form 3A (Part A) of IRDAI (Investment) Regulations, 2016, as at the latest Quarter reported to IRDAI. 2. IRDA Approval Reference shall be the Product approval reference No. based on which the 'Segregated Fund' was launched for the 1st time. 3. Category of Investment specified above are as per Annexure 1 of Master Circular Page 70 of 100 b. For New Segregated Fund FORMAT 2 CATEGORIES IN WHICH INVESTMENT WOULD BE MADE - NEW FUND Name of the Fund: SFIN No ………………………….. Asset Category Name as per F&U (Acturial) A CENTRAL GOVT. SECURITIES A01 Central Government Bonds CGSB A02 Special Deposits CSPD A03 Deposit under Section 7 of Insurance Act, 1938 CDSS A04 Treasury Bills CTRB B CENTRAL GOVT. SEC, STATE GOVT OR OTHER APPROVED SECURITIES B01 Central Government Guaranteed Loans / Bonds CGSL B02 State Government Bonds SGGB B03 State Government Guaranteed Loans SGGL B04 Other Approved Securities (excluding Infrastructure Investments) SGOA B05 Guaranteed Equity SGGE C (a) HOUSING & LOANS TO STATE GOVT FOR HOUSING / FFE C01 Loans to State Government for Housing HLSH C02 Loans to State Government for Fire Fighting Equipment HLSF C03 Term Loan - HUDCO / NHB / Institutions accredited by NHB HTLH C04 Commercial Papers - NHB / Institutions accredited by NHB HTLN C05 Housing - Securitised Assets HMBS C06 Debentures/Bonds/CPs/Loans - Promoter Group HDPG C07 Long Term Bank Bonds Approved Investment - Affordable Housing HLBH TAXABLE BONDS Page 71 of 100 C08 Bonds / Debentures issued by HUDCO HTHD C09 Bonds / Debentures issued by NHB / Institutions accredited by NHB HTDN C10 Bonds / Debentures issued by Authority constituted under any Housing / Building Scheme approved by Central / State / any Authority or Body constituted by Central / State Act HTDA TAX FREE BONDS C11 Bonds / Debentures issued by HUDCO HFHD C12 Bonds / Debentures issued by NHB / Institutions accredited by NHB HFDN C13 Bonds / Debentures issued by Authority constituted under any Housing / Building Scheme approved by Central / State / any Authority or Body constituted by Central / State Act HFDA (b) OTHER INVESTMENTS (HOUSING) C14 Debentures / Bonds / CPs / Loans HODS C15 Housing - Securitised Assets HOMB C16 Debentures / Bonds / CPs / Loans - (Promoter Group) HOPG C17 Long Term Bank Bonds Other Investment– Affordable Housing HOLB C18 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) HORD (c) INFRASTRUCTURE INVESTMENTS C19 Infrastructure - Other Approved Securities ISAS C20 Infrastructure - PSU - Equity shares - Quoted ITPE C21 Infrastructure - Corporate Securities - Equity shares-Quoted ITCE C22 Infrastructure - Equity (Promoter Group) IEPG C23 Infrastructure - Securitised Assets IESA C24 Infrastructure - Debentures / Bonds / CPs / loans - (Promoter Group) IDPG C25 Infrastructure - Infrastructure Development Fund (IDF) IDDF C26 Onshore Rupee Bonds issued by ADB and IFC (Infrastructure- approved) IORB C27 Long Term Bank Bonds Approved Investment– Infrastructure ILBI C28 Infrastructure Investments rated not less than “A” along with Rating of “EL1” IELB Page 72 of 100 C29 Debt Instruments of InvITs - Approved Investments IDIT TAXABLE BONDS C30 Infrastructure - PSU - Debentures / Bonds IPTD C31 Infrastructure - PSU - CPs IPCP C32 Infrastructure - Other Corporate Securities - Debentures/ Bonds ICTD C33 Infrastructure - Other Corporate Securities - CPs ICCP C34 Infrastructure - Term Loans (with Charge) ILWC TAX FREE BONDS C35 Infrastructure - PSU - Debentures / Bonds IPFD C36 Infrastructure - Other Corporate Securities - Debentures/ Bonds ICFD (d) INFRASTRUCTURE - OTHER INVESTMENTS C37 Infrastructure - Equity (including unlisted) IOEQ C38 Infrastructure - Debentures / Bonds / CPs / loans IODS C39 Infrastructure - Securitised Assets IOSA C40 Infrastructure - Equity (Promoter Group) IOPE C41 Infrastructure - Debentures / Bonds / CPs / loans - (Promoter Group) IOPD C42 Onshore Rupee Bonds issued by ADB and IFC (Infrastructure- others) IOOB C43 Long Term Bank Bonds Other Investment– Infrastructure IOLB C44 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) IORD C45 Reclassified Approved Investments - Equity (Point 6 under Note for Regulation 4 to 9) IORE C45 Infrastructure Investment below “A” or “EL1” IOEL C47 Debt Instruments of InvITs - Other Investments IOIT D APPROVED INVESTMENT SUBJECT TO EXPOSURE NORMS D01 PSU - Equity shares - Quoted EAEQ D02 Corporate Securities - Equity shares (Ordinary)- Quoted EACE D03 Equity Shares - Companies incorporated outside India (invested prior to IRDA Regulations) EFES Page 73 of 100 D04 Equity Shares - Promoter Group EEPG D05 Corporate Securities - Bonds - (Taxable) EPBT D06 Corporate Securities - Bonds - (Tax Free) EPBF D07 Corporate Securities - Preference Shares EPNQ D08 Corporate Securities - Investment in Subsidiaries ECIS D09 Corporate Securities - Debentures ECOS D10 Corporate Securities - Debentures / Bonds/ CPs /Loan - (Promoter Group) EDPG D11 Municipal Bonds - Rated EMUN D12 Investment properties - Immovable EINP D13 Loans - Policy Loans ELPL D14 Loans - Secured Loans - Mortgage of Property in India (Term Loan) ELMI D15 Loans - Secured Loans - Mortgage of Property outside India (Term Loan) ELMO D16 Deposits - Deposit with Scheduled Banks, FIs (incl. Bank Balance awaiting Investment), CCIL, RBI ECDB D17 Deposits - CDs with Scheduled Banks EDCD D18 Deposits - Repo / Reverse Repo - Govt Securities ECMR D19 Deposits - Repo / Reverse Repo - Corporate Securities ECCR D20 Deposit with Primary Dealers duly recognised by Reserve Bank of India EDPD D21 CCIL - CBLO ECBO D22 Commercial Papers ECCP D23 Application Money ECAM D24 Perpetual Debt Instruments of Tier I & II Capital issued by PSU Banks EUPD D25 Perpetual Debt Instruments of Tier I & II Capital issued by Non-PSU Banks EPPD D26 Perpetual Non-Cum. P.Shares & Redeemable Cumulative P.Shares of Tier 1 & 2 Capital issued by PSU Banks EUPS D27 Perpetual Non-Cum. P.Shares & Redeemable Cumulative P.Shares of Tier 1 & 2 Capital issued by Non-PSU Banks EPPS D28 Foreign Debt Securities (invested prior to IRDA Regulations) EFDS D29 Mutual Funds - Gilt / G Sec / Liquid Schemes EGMF D30 Mutual Funds - (under Insurer's Promoter Group) EMPG D31 Net Current Assets (Only in respect of ULIP Fund Business) ENCA Page 74 of 100 D32 Passively Managed Equity ETF (Non Promoter Group) EETF D33 Passively Managed Equity ETF (Promoter Group) EETP D34 Onshore Rupee Bonds issued by ADB and IFC EORB D35 Debt Capital Instruments (DCI-Basel III) EDCI D36 Redeemable Non-cumulative Preference Shares (RNCPS- Basel III) ERNP D37 Redeemable Cumulative Preference Shares (RCPS- Basel III) ERCP D38 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [PSU Banks] EAPS D39 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [Private Banks] EAPB D40 Units of Real Estate Investment Trust (REITs) ERIT D41 Units of Infrastructure Investment Trust EIIT D42 Debt ETFs - "Approved Investments" EDTF D43 Debt Instruments of REITs - Approved Investments EDRT E OTHER INVESTMENTS E01 Bonds - PSU - Taxable OBPT E02 Bonds - PSU - Tax Free OBPF E03 Equity Shares (incl Co-op Societies) OESH E04 Equity Shares (PSUs & Unlisted) OEPU E05 Equity Shares - Promoter Group OEPG E06 Debentures OLDB E07 Debentures / Bonds/ CPs / Loans etc. - (Promoter Group) ODPG E08 Municipal Bonds OMUN E09 Commercial Papers OACP E10 Preference Shares OPSH E11 SEBI approved Alternate Investment Fund (Category I) OAFA E12 SEBI approved Alternate Investment Fund (Category II) OAFB E13 Short term Loans (Unsecured Deposits) OSLU E14 Term Loans (without Charge) OTLW E15 Mutual Funds - Debt / Income / Serial Plans / Liquid schemes OMGS E16 Mutual Funds - (under Insurer's Promoter Group) OMPG Page 75 of 100 E17 Securitised Assets OPSA E18 Investment properties - Immovable OIPI E19 Passively Managed Equity ETF (Non Promoter Group) OETF E20 Passively Managed Equity ETF (Promoter Group) OETP E21 Onshore Rupee Bonds issued by ADB and IFC OORB E22 Debt Capital Instruments (DCI-Basel III) ODCI E23 Redeemable Non-cumulative Preference Shares (RNCPS - Basel III) ORNP E24 Redeemable Cumulative Preference Shares (RCPS - Basel III) ORCP E25 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) ORAD E26 Reclassified Approved Investments - Equity (Point 6 under Note for Regulation 4 to 9) ORAE E27 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [PSU Banks] OAPS E28 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [Private Banks] OAPB E29 Units of Real Estate Investment Trust (REITs) ORIT E30 Units of Infrastructure Investment Trust OIIT E31 Debt ETFs - "Other Investments" ODTF E32 Debt Instruments of REITs - Other Investments ODRT Date: Appointed Actuary Chief Investment Officer Chief Risk Officer Chief Finance Officer Page 76 of 100 6.2 Fund Clearance and declaration FORMAT 3 ULIP FUND CLEARANCE FORMAT OF DECLARATION 1. Name of the Life Insurer : 2. Registration No : 3. ULIP Fund Type: 1. Unit Linked Individual Fund (ULIF) : 2. Unit Linked Group Fund (ULGF) : 4. Clearance Sought For: 1. Existing Segregated Fund : 2. New Segregated Fund : 5. SFIN No : DECLARATION 1. The Investment Policy (IP) of the Segregated Fund (SFIN) is a part of File & Use procedure, under Section 8.1 of Form IRDAI-Life-Linked-NP, and we confirm that the IP fully complies with IRDAI (Investment) Regulations, 2016 read along with Circulars and Guidelines issued there under 2. The SFIN No……………………… confirms to the procedure prescribed in Section 4.16 (a) (1) (ii) of Investment – Master Circular, under IRDAI ULIP Funds Clearance Procedure 3. The SFIN No.…………………… is unique and has not been allotted to any other Segregated Fund(s) 4. The ‘SFIN No………………….. invests / will invest only in the ‘exhaustive’ Categories of Investments as provided in Investment – Master Circular issued under IRDAI (Investment) Regulations, 2016 5. The Investments Categories (as mentioned in point 4 above) in which SFIN No……………………. invests / will invest is as per the IP [as specified in Section 8.1 of Form IRDAI-Life-Linked-NP of File & Use procedure] and are covered in the Standard Operating Procedure (SOP), approved by the Investment Committee (IC) which is / will be followed by the Investment Department 6. The SFIN No………………….. has / would have identifiable, individual ‘Scrips’, grouped as per Guidelines provided in Investment – Master Circular and the same is / would be identifiable at custodian level, by a separate sub code. 7. No individual security is / would be earmarked between two or more ‘segregated fund’ 8. The SFIN No…………………. or the Scheme / Fund (by whichever name called) is a NEW Scheme / Fund offered and is NOT a minor modification of existing Scheme / Fund Page 77 of 100 9. The SFIN No………………… has / would have a ‘single’ NAV, declared on a ‘day-to-day’ basis and uploaded in the Insurer’s Public Domain and in the Life Insurance Council Website on the same day 10. The below mentioned information is / would be enabled through a portal, for the policyholder through a secured login: a. the value of policy wise “units” held by him, as per FORM D02 b. SFIN No……………. wise NAV on both the Insurer’s website and life council website on the same day 11. As part of product brochure, had included the disclosure mandated under FORM D02 and had provided the secured login details to Policyholders along with the Policy document 12. The ‘Units’ created on a ‘day-to-day’ basis for SFIN No…………………. are / would be backed by Investment assets 13. The Investment Trial Balance, of SFIN No………………….. is / will be generated through the automated System 14. For SFIN No………………… all prudential and Exposure norms as per IRDAI (Investment) Regulations, 2016 are / will be complied 15. The Fund Management Charges (FMC) is clearly identified with SFIN No……………… and NOT otherwise 16. Transfer of funds between SFINs are / will be done as per the norms laid in point 4.8 (3) of the Investment - Master Circular 17. The SFIN No………………… is / would be quoted in all ‘Fund’ related filing / disclosure. Also SFIN No ……………….. is / would be mentioned in all documents and all fund-wise information provided to policyholders, other users (public, distribution channels and others) and on all returns or fund related correspondence with IRDAI 18. The copy of certificate issued by the Chartered Accountant appointed for certification of Systems and Process (in relation to integrated systems between Policy Admin System, Investment System and Accounting System) in place as per the Guidance Note issued in “Investment Risk Management Systems and Process of Insurance Companies” by The Institute of Chartered Accountants of India, is attached to this declaration We certify that the information given herein is correct and complete and nothing has been concealed or suppressed. Signature………………… Signature………………… APPOINTED ACTUARY CHIEF RISK OFFICER Signature………………… Signature………………… CHIEF FINANCIAL OFFICER CHIEF INVESTMENT OFFICER Page 78 of 100 6.3 Exhaustive Asset Categories as per IRDAI (Investment) Regulations, 2016 a. Exhaustive list of Category Codes ANNEXURE – 1 CATEGORY OF INVESTMENTS (COI) The following are the exhaustive Category of Investments (COI) that are permissible under Life, Pension and General Annuity, Linked Insurance Business, General Insurance (including Re Insurance) and Health Insurance Business, as per the Insurance Regulatory and Development Authority of India. No INVESTMENT CATEGORY HEADS CAT CODE A CENTRAL GOVT. SECURITIES A01 Central Government Bonds CGSB A02 Special Deposits CSPD A03 Deposit under Section 7 of Insurance Act, 1938 CDSS A04 Treasury Bills CTRB B CENTRAL GOVT. SEC, STATE GOVT OR OTHER APPROVED SECURITIES B01 Central Government Guaranteed Loans / Bonds CGSL B02 State Government Bonds SGGB B03 State Government Guaranteed Loans SGGL B04 Other Approved Securities (excluding Infrastructure Investments) SGOA B05 Guaranteed Equity SGGE C (a) HOUSING & LOANS TO STATE GOVT FOR HOUSING / FFE C01 Loans to State Government for Housing HLSH C02 Loans to State Government for Fire Fighting Equipment HLSF C03 Term Loan - HUDCO / NHB / Institutions accredited by NHB HTLH C04 Commercial Papers - NHB / Institutions accredited by NHB HTLN C05 Housing - Securitised Assets HMBS C06 Debentures/Bonds/CPs/Loans - Promoter Group HDPG C07 Long Term Bank Bonds Approved Investment - Affordable Housing HLBH TAXABLE BONDS C08 Bonds / Debentures issued by HUDCO HTHD C09 Bonds / Debentures issued by NHB / Institutions accredited by NHB HTDN Page 79 of 100 C10 Bonds / Debentures issued by Authority constituted under any Housing / Building Scheme approved by Central / State / any Authority or Body constituted by Central / State Act HTDA TAX FREE BONDS C11 Bonds / Debentures issued by HUDCO HFHD C12 Bonds / Debentures issued by NHB / Institutions accredited by NHB HFDN C13 Bonds / Debentures issued by Authority constituted under any Housing / Building Scheme approved by Central / State / any Authority or Body constituted by Central / State Act HFDA (b) OTHER INVESTMENTS (HOUSING) C14 Debentures / Bonds / CPs / Loans HODS C15 Housing - Securitised Assets HOMB C16 Debentures / Bonds / CPs / Loans - (Promoter Group) HOPG C17 Long Term Bank Bonds Other Investment– Affordable Housing HOLB C18 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) HORD (c) INFRASTRUCTURE INVESTMENTS C19 Infrastructure - Other Approved Securities ISAS C20 Infrastructure - PSU - Equity shares - Quoted ITPE C21 Infrastructure - Corporate Securities - Equity shares-Quoted ITCE C22 Infrastructure - Equity (Promoter Group) IEPG C23 Infrastructure - Securitised Assets IESA C24 Infrastructure - Debentures / Bonds / CPs / loans - (Promoter Group) IDPG C25 Infrastructure - Infrastructure Development Fund (IDF) IDDF C26 Onshore Rupee Bonds issued by ADB and IFC (Infrastructure- approved) IORB C27 Long Term Bank Bonds Approved Investment– Infrastructure ILBI C28 Infrastructure Investments rated not less than “A” along with Rating of “EL1” IELB C29 Debt Instruments of InvITs - Approved Investments IDIT TAXABLE BONDS C30 Infrastructure - PSU - Debentures / Bonds IPTD C31 Infrastructure - PSU - CPs IPCP C32 Infrastructure - Other Corporate Securities - Debentures/ Bonds ICTD C33 Infrastructure - Other Corporate Securities - CPs ICCP Page 80 of 100 C34 Infrastructure - Term Loans (with Charge) ILWC TAX FREE BONDS C35 Infrastructure - PSU - Debentures / Bonds IPFD C36 Infrastructure - Other Corporate Securities - Debentures/ Bonds ICFD (d) INFRASTRUCTURE - OTHER INVESTMENTS C37 Infrastructure - Equity (including unlisted) IOEQ C38 Infrastructure - Debentures / Bonds / CPs / loans IODS C39 Infrastructure - Securitised Assets IOSA C40 Infrastructure - Equity (Promoter Group) IOPE C41 Infrastructure - Debentures / Bonds / CPs / loans - (Promoter Group) IOPD C42 Onshore Rupee Bonds issued by ADB and IFC (Infrastructure- others) IOOB C43 Long Term Bank Bonds Other Investment– Infrastructure IOLB C44 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) IORD C45 Reclassified Approved Investments - Equity (Point 6 under Note for Regulation 4 to 9) IORE C46 Infrastructure Investment below “A” or “EL1” IOEL C47 Debt Instruments of InvITs - Other Investments IOIT D APPROVED INVESTMENT SUBJECT TO EXPOSURE NORMS D01 PSU - Equity shares - Quoted EAEQ D02 Corporate Securities - Equity shares (Ordinary)- Quoted EACE D03 Equity Shares - Companies incorporated outside India (invested prior to IRDA Regulations) EFES D04 Equity Shares - Promoter Group EEPG D05 Corporate Securities - Bonds - (Taxable) EPBT D06 Corporate Securities - Bonds - (Tax Free) EPBF D07 Corporate Securities - Preference Shares EPNQ D08 Corporate Securities - Investment in Subsidiaries ECIS D09 Corporate Securities - Debentures ECOS D10 Corporate Securities - Debentures / Bonds/ CPs /Loan - (Promoter Group) EDPG D11 Municipal Bonds - Rated EMUN D12 Investment properties - Immovable EINP Page 81 of 100 D13 Loans - Policy Loans ELPL D14 Loans - Secured Loans - Mortgage of Property in India (Term Loan) ELMI D15 Loans - Secured Loans - Mortgage of Property outside India (Term Loan) ELMO D16 Deposits - Deposit with Scheduled Banks, FIs (incl. Bank Balance awaiting Investment), CCIL, RBI ECDB D17 Deposits - CDs with Scheduled Banks EDCD D18 Deposits - Repo / Reverse Repo - Govt Securities ECMR D19 Deposits - Repo / Reverse Repo - Corporate Securities ECCR D20 Deposit with Primary Dealers duly recognised by Reserve Bank of India EDPD D21 CCIL - CBLO ECBO D22 Commercial Papers ECCP D23 Application Money ECAM D24 Perpetual Debt Instruments of Tier I & II Capital issued by PSU Banks EUPD D25 Perpetual Debt Instruments of Tier I & II Capital issued by Non-PSU Banks EPPD D26 Perpetual Non-Cum. P.Shares & Redeemable Cumulative P.Shares of Tier 1 & 2 Capital issued by PSU Banks EUPS D27 Perpetual Non-Cum. P.Shares & Redeemable Cumulative P.Shares of Tier 1 & 2 Capital issued by Non-PSU Banks EPPS D28 Foreign Debt Securities (invested prior to IRDA Regulations) EFDS D29 Mutual Funds - Gilt / G Sec / Liquid Schemes EGMF D30 Mutual Funds - (under Insurer's Promoter Group) EMPG D31 Net Current Assets (Only in respect of ULIP Fund Business) ENCA D32 Passively Managed Equity ETF (Non Promoter Group) EETF D33 Passively Managed Equity ETF (Promoter Group) EETP D34 Onshore Rupee Bonds issued by ADB and IFC EORB D35 Debt Capital Instruments (DCI-Basel III) EDCI D36 Redeemable Non-cumulative Preference Shares (RNCPS- Basel III) ERNP D37 Redeemable Cumulative Preference Shares (RCPS- Basel III) ERCP D38 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [PSU Banks] EAPS D39 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [Private Banks] EAPB D40 Units of Real Estate Investment Trust (REITs) ERIT D41 Units of Infrastructure Investment Trust EIIT D42 Debt ETFs - "Approved Investments" EDTF Page 82 of 100 D43 Debt Instruments of REITs - Approved Investments EDRT E OTHER INVESTMENTS E01 Bonds - PSU - Taxable OBPT E02 Bonds - PSU - Tax Free OBPF E03 Equity Shares (incl Co-op Societies) OESH E04 Equity Shares (PSUs & Unlisted) OEPU E05 Equity Shares - Promoter Group OEPG E06 Debentures OLDB E07 Debentures / Bonds/ CPs / Loans etc. - (Promoter Group) ODPG E08 Municipal Bonds OMUN E09 Commercial Papers OACP E10 Preference Shares OPSH E11 SEBI approved Alternate Investment Fund (Category I) OAFA E12 SEBI approved Alternate Investment Fund (Category II) OAFB E13 Short term Loans (Unsecured Deposits) OSLU E14 Term Loans (without Charge) OTLW E15 Mutual Funds - Debt / Income / Serial Plans / Liquid Schemes OMGS E16 Mutual Funds - (under Insurer's Promoter Group) OMPG E17 Securitised Assets OPSA E18 Investment properties - Immovable OIPI E19 Passively Managed Equity ETF (Non Promoter Group) OETF E20 Passively Managed Equity ETF (Promoter Group) OETP E21 Onshore Rupee Bonds issued by ADB and IFC OORB E22 Debt Capital Instruments (DCI-Basel III) ODCI E23 Redeemable Non-cumulative Preference Shares (RNCPS - Basel III) ORNP E24 Redeemable Cumulative Preference Shares (RCPS - Basel III) ORCP E25 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) ORAD E26 Reclassified Approved Investments - Equity (Point 6 under Note for Regulation 4 to 9) ORAE E27 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [PSU Banks] OAPS E28 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [Private Banks] OAPB Page 83 of 100 E29 Units of Real Estate Investment Trust (REITs) ORIT E30 Units of Infrastructure Investment Trust OIIT E31 Debt ETFs - "Other Investments" ODTF E32 Debt Instruments of REITs - Other Investments ODRT Page 84 of 100 b. Valuation methodology for Investment Categories ANNEXURE – 2 MARKET VALUE - BASIS FOR FORM-3A / FORM-3B Method for determining the Market Value of Investments to report in FORM 3A, FORM 3B of IRDAI (Investment) Regulations, 2016 NO PARTICULARS CAT CODE MARKET VALUE – BASIS FOR FORM-3A, FORM-3B A GOVERNMENT SECURITIES A01 Central Government Bonds CGSB Investments valued either as per prices provided by FIMMDA or any other rating agency registered with SEBI. A02 Special Deposits CSPD At Cost A03 Deposit under Section 7 of Insurance Act, 1938 CDSS Investments valued either as per prices provided by FIMMDA or any other rating agency registered with SEBI. A04 Treasury Bills CTRB At cost subject to amortisation of discount B GOVERNMENT SECURITIES / OTHER APPROVED SECURITIES B01 Central Government Guaranteed Loans / Bonds CGSL Investments valued either as per prices / Yield Matrix provided by FIMMDA or any other rating agency registered with SEBI. B02 State Government Bonds SGGB Investments valued either as per prices provided by FIMMDA or any other rating agency registered with SEBI. B03 State Government Guaranteed Loans SGGL Investments valued either as per prices provided by FIMMDA or any other rating agency registered with SEBI. B04 Other Approved Securities (excluding Infrastructure Investments) SGOA Investments valued either as per prices / Yield Matrix provided by FIMMDA or any other rating agency registered with SEBI. B05 Guaranteed Equity SGGE Book Value. C (a) HOUSING & LOANS TO STATE GOVT. FOR HOUSING AND FFE C01 Loans to State Government for Housing HLSH At Cost Less Provisions Page 85 of 100 C02 Loans to State Government for Fire Fighting Equipment HLSF At Cost Less Provisions C03 Term Loan - HUDCO / NHB / Institutions accredited by NHB HTLH At Cost Less Provisions C04 Commercial Papers - NHB / Institutions accredited by NHB HTLN Valued at amortised cost based on straight line method of amortisation over the remaining maturity period of the instrument or using IRR/ YTM basis of amortisation. C05 Housing - Securitised Assets HMBS Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C06 Bonds/Debentures/CPs/Loans - Promoter Group HDPG Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI and loans at cost. Commercial paper at amortised cost. C07 Long Term Bank Bonds Approved Investment – Affordable Housing HLBH Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI TAXABLE BONDS OF C08 Bonds / Debentures issued by HUDCO HTHD Investments valued either as per FIMMDA or at applicable market yield rates published by any SEBI approved Rating Agency C09 Bonds / Debentures issued by NHB / Institution accredited by NHB HTDN Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C10 Bonds / Debentures issued by Authority constituted under any Housing / Building Scheme approved by Central / State / any Authority or Body constituted by Central / State Act HTDA Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI TAX FREE BONDS C11 Bonds / Debentures issued by HUDCO HFHD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C12 Bonds / Debentures issued by NHB / Institution accredited by NHB HFDN Investments valued either as per FIMMDA or at applicable market yield rates published by any SEBI approved Rating Agency Page 86 of 100 C13 Bonds / Debentures issued by Authority constituted under any Housing / Building Scheme approved by Central / State / any Authority or Body constituted by Central / State Act HFDA Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI (b) OTHER INVESTMENTS (HOUSING) C14 Debentures / Bonds / CPs / Loans HODS Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI. Commercial paper at amortised cost. C15 Housing - Securitised Assets HOMB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C16 Debentures / Bonds / CPs / Loans - (Promoter Group) HOPG Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI and loans at cost. Commercial paper at amortised cost. C17 Long Term Bank Bonds Other Investment– Affordable Housing HOLB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C18 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) HORD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI (c) INFRASTRUCTURE INVESTMENTS C19 Infrastructure - Other Approved Securities ISAS Investments valued either as per prices provided by FIMMDA or any other rating agency registered with SEBI. C20 Infrastructure - PSU - Equity shares - Quoted ITPE If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) Page 87 of 100 C21 Infrastructure - Corporate Securities - Equity shares- Quoted ITCE If quoted, valued at Market Value (last Quoted price should not be later than 30 days). If unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) C22 Infrastructure - Equity (Promoter Group) IEPG If quoted, valued at Market Value (last Quoted price should not be later than 30 days). If unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) C23 Infrastructure - Securitised Assets IESA Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C24 Infrastructure - Debentures / Bonds / CPs / loans - Promoter Group IDPG Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI and loans at cost. Commercial paper at amortised cost. C25 Infrastructure - Infrastructure Development Fund (IDF) IDDF At NAV (if available) or at cost less Provision for diminution C26 Onshore Rupee Bonds issued by ADB and IFC (Infrastructure- approved) IORB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C27 Long Term Bank Bonds Approved Investment– Infrastructure ILBI Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C28 Infrastructure Investments rated not less than “A” along with Rating of “EL1” IELB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C29 Debt Instruments of InvITs - Approved Investments IDIT Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI Page 88 of 100 TAXABLE BONDS C30 Infrastructure - PSU - Debentures / Bonds IPTD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C31 Infrastructure - PSU - CPs IPCP Valued at amortised cost based on straight line method of amortisation over the remaining maturity period of the instrument or using IRR/ YTM basis of amortisation. C32 Infrastructure - Other Corporate Securities - Debentures/ Bonds ICTD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C33 Infrastructure - Other Corporate Securities - CPs ICCP Valued at amortised cost based on straight line method of amortisation over the remaining maturity period of the instrument or using IRR/ YTM basis of amortisation. C34 Infrastructure - Term Loans (with Charge) ILWC At Cost less opening Provisions TAX FREE BONDS C35 Infrastructure - PSU - Debentures / Bonds IPFD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C36 Infrastructure - Other Corporate Securities - Debentures/ Bonds ICFD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI (d) INFRASTRUCTURE - OTHER INVESTMENTS C37 Infrastructure - Equity (including unlisted) IOEQ If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) Page 89 of 100 C38 Infrastructure - Debentures / Bonds / CPs / loans IODS Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI and loans at cost. Commercial paper at amortised cost. C39 Infrastructure - Securitised Assets IOSA Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C40 Infrastructure - Equity (Promoter Group) IOPE If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) C41 Infrastructure - Debentures / Bonds / CPs / loans - (Promoter Group) IOPD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI and loans at cost. Commercial paper at amortised cost. C42 Onshore Rupee Bonds issued by ADB and IFC (Infra - others) IOOB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C43 Long Term Bank Bonds Other Investment– Infrastructure IOLB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C44 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) IORD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI C45 Reclassified Approved Investments - Equity (Point 6 under Note for Regulation 4 to 9) IORE If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) C45 Infrastructure Investment below “A” or “EL1” IOEL Investments valued either as per FIMMDA or at applicable market yield Page 90 of 100 rates published by any Rating Agency registered with SEBI C47 Debt Instruments of InvITs - Other Investments IOIT Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D APPROVED INVESTMENT SUBJECT TO EXPOSURE NORMS D01 PSU - Equity shares - quoted EAEQ Market Value D02 Corporate Securities - Equity shares (Ordinary)-quoted EACE Market Value D03 Equity Share - Companies incorporated outside India (invested prior to IRDA Regulations) EFES If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) D04 Equity Shares - Promoter Group EEPG If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) D05 Corporate Securities - Bonds - (Taxable) EPBT Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D06 Corporate Securities - Bonds - (Tax Free) EPBF Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI Page 91 of 100 D07 Corporate Securities - Preference Shares EPNQ If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) D08 Corporate Securities - Investment in Subsidiaries ECIS At Cost less Provision for diminution D09 Corporate Securities - Debentures ECOS Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D10 Corporate Securities - Debentures / Bonds/ CPs /Loan - Promoter Group EDPG Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI and loans at cost. Commercial paper at amortised cost. D11 Municipal Bonds - Rated EMUN Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D12 Investment properties - Immovable EINP At Cost D13 Loans - Policy Loans ELPL At Cost D14 Loans - Secured Loans - Mortgage of Property in India (Term Loan) ELMI At Cost Less Provisions D15 Loans - Secured Loans - Mortgage of Property outside India (Term Loan) ELMO At Cost Less Provisions D16 Deposits - Deposit with Scheduled Banks, FIs (incl. Bank Balance awaiting Investment), CCIL, RBI ECDB At Carrying Cost D17 Deposits - CDs with Scheduled Banks EDCD At Carrying Cost D18 Deposits - Repo / Reverse Repo - Govt Securities ECMR At Cost D19 Deposits - Repo / Reverse Repo - Corporate Securities ECCR At Cost D20 Deposit with Primary Dealers duly recognised by Reserve Bank of India EDPD At Cost D21 CCIL - CBLO ECBO At Carrying Cost Page 92 of 100 D22 Commercial Papers ECCP Valued at amortised cost based on straight line method of amortisation over the remaining maturity period of the instrument or using IRR/ YTM basis of amortisation. D23 Application Money ECAM At Cost D24 Perpetual Debt Instruments of Tier I & II Capital issued by PSU Banks EUPD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D25 Perpetual Debt Instruments of Tier I & II Capital issued by Non-PSU Banks EPPD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D26 Perpetual Non-Cum. P.Shares & Redeemable Cumulative P.Shares of Tier 1 & 2 Capital issued by PSU Banks EUPS Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D27 Perpetual Non-Cum. P.Shares & Redeemable Cumulative P.Shares of Tier 1 & 2 Capital issued by Non-PSU Banks EPPS Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D28 Foreign Debt Securities (invested prior to IRDA Regulations) EFDS At Carrying Cost D29 Mutual Funds - Gilt / G Sec / Liquid Schemes EGMF At NAV as on the reporting date D30 Mutual Funds - (under Insurer's Promoter Group) EMPG At NAV as on the reporting date D31 Net Current Assets (only in the case of ULIP Fund Business) EMCA At Book Value D32 Passively Managed Equity ETF (Non Promoter Group) EETF Traded Price or at NAV as on the reporting date D33 Passively Managed Equity ETF (Promoter Group) EETP Traded Price or at NAV as on the reporting date D34 Onshore Rupee Bonds issued by ADB and IFC EORB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D35 Debt Capital Instruments (DCI-Basel III) EDCI Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D36 Redeemable Non-cumulative Preference Shares (RNCPS- Basel III) ERNP Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI Page 93 of 100 D37 Redeemable Cumulative Preference Shares (RCPS- Basel III) ERCP Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D38 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [PSU Banks] EAPS Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D39 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [Private Banks] EAPB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI D40 Units of Real Estate Investment Trust (REITs) ERIT Market Value (last Quoted price should not be later than 30 days). Where Market Quote is not available for last 30 days , the Units shall be valued as per the latest NAV ( not more than 6 months old) of the Units published by the trust. D41 Units of Infrastructure Investment Trust EIIT Market Value (last Quoted price should not be later than 30 days). Where Market Quote is not available for last 30 days , the Units shall be valued as per the latest NAV ( not more than 6 months old) of the Units published by the trust. D42 Debt ETFs - "Approved Investments" EDTF Traded Price or at NAV as on the reporting date D43 Debt Instruments of REITs - Approved Investments EDRT Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E OTHER INVESTMENTS E01 Bonds - PSU - Taxable OBPT Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E02 Bonds - PSU - Tax Free OBPF Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI Page 94 of 100 E03 Equity Shares (incl Co-op Societies) OESH If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) E04 Equity Shares (PSUs & Unlisted) OEPU If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) E05 Equity Shares - Promoter Group OEPG If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) E06 Debentures OLDB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E07 Debentures / Bonds/ CPs / Loans etc. - Promoter Group ODPG Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI and loans at cost. Commercial paper at amortised cost. E08 Municipal Bonds OMUN Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E09 Commercial Papers OACP Valued at amortised cost based on straight line method of amortisation over the remaining maturity period of the instrument or using IRR/ YTM basis of amortisation. Page 95 of 100 E10 Preference Shares OPSH If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) E11 SEBI approved Alternate Investment Fund (Category I) OAFA At NAV (if available) or at cost less Provision for diminution E12 SEBI approved Alternate Investment Fund (Category II) OAFB At NAV (if available) or at cost less Provision for diminution E13 Short term Loans (Unsecured Deposits) OSLU At Cost Less Provisions E14 Term Loans (without Charge) OTLW At Cost Less Provisions E15 Mutual Funds - Debt / Income / Serial Plans OMGS At NAV as on the reporting date E16 Mutual Funds (under Insurer's Promoter Group) OMPG At NAV as on the reporting date E17 Securitised Assets OPSA Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E18 Investment properties - Immovable OIPI At Cost E19 Passively Managed Equity ETF (Non Promoter Group) OETF Traded Price or at NAV as on the reporting date E20 Passively Managed Equity ETF (Promoter Group) OETP Traded Price or at NAV as on the reporting date E21 Onshore Rupee Bonds issued by ADB and IFC OORB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E22 Debt Capital Instruments (DCI-Basel III) ODCI Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E23 Redeemable Non-cumulative Preference Shares (RNCPS- Basel III) ORNP Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E24 Redeemable Cumulative Preference Shares (RCPS- Basel III) ORCP Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI Page 96 of 100 E25 Reclassified Approved Investments - Debt (Point 6 under Note for Regulation 4 to 9) ORAD Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E26 Reclassified Approved Investments - Equity (Point 6 under Note for Regulation 4 to 9) ORAE If quoted, valued at Market Value (last Quoted price should not be later than 30 days). In unquoted, Book Value Less Provisions (Provisions shall be made at the end of the Year. For the purpose of Quarterly Returns, if there exist any Provision for any Equity Share at the beginning of the year, the same shall be reduced from the Book Value) E27 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [PSU Banks] OAPS Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E28 Additional Tier 1 (Basel III Compliant) Perpetual Bonds – [Private Banks] OAPB Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI E29 Units of Real Estate Investment Trust (REITs) ORIT Market Value (last Quoted price should not be later than 30 days). Where Market Quote is not available for last 30 days , the Units shall be valued as per the latest NAV ( not more than 6 months old) of the Units published by the trust. E30 Units of Infrastructure Investment Trust OIIT Market Value (last Quoted price should not be later than 30 days). Where Market Quote is not available for last 30 days , the Units shall be valued as per the latest NAV ( not more than 6 months old) of the Units published by the trust. E31 Debt ETFs - "Other Investments" ODTF Traded Price or at NAV as on the reporting date E32 Debt Instruments of REITs - Other Investments ODRT Investments valued either as per FIMMDA or at applicable market yield rates published by any Rating Agency registered with SEBI Page 97 of 100 7. LIST OF CIRCULARS COVERED Circular reference Description IRDA/F&I/CIR/INV/250/12/2012 Participation of insurers in Repo / Reverse repo transactions in Corporate Debts securities IRDA/F&I/INV/CIR/064/04/2013 Regarding Investment limit of 10% for Reverse Repo transactions in Government Securities IRDA/ F&I/CIR/INV/074/03/2014 Investment in Equity Exchange traded funds IRDA/F&I/CIR/INV/156/08/2015 Investment in GILT exchange traded funds (GILT-ETF) IRDA/F&I/CIR/INV/134/2013 Securities lending and borrowing framework IRDA /CIR/INV/020/2008-09 Investment in equity shares through IPO IRDA /CIR/INV/020/2008-09 Investment in Mutual fund IRDA /CIR/INV/020/2008-09 Investment in Asset Backed Securities, PTCs and SRs IRDA /CIR/INV/005/2008-09 Investment in Perpetual debt instruments of Bank’s Tier-I Capital and debt capital instruments of upper Tier-II capital IRDA /CIR/INV/020/2008-09 IRDA/F&I/Cir/INV/203/2011 IRDA/F&I/INV/CIR/054/03/2013 IRDA-F&I-CIR-INV-172-08-2013 Investment in Alternate Investment Fund IRDA /INV/ CIR /038/2006-07 Investment in 8.13% OIL Marketing Companies, GOI Special Bonds, 2021 IRDA/INV-GLR-001-2007-08 Investment 8.15% GOI FCI Special Bonds, 2002 & 8.03% GOI FCI Special Bonds, 2024 – Other Approved Securities IRDA /GLR/002/2007-08 Investment in oil companies GOI special bonds IRDA/F&I /CIR/INV/036/09/2009 Investment in IFFCL Taxable Bonds – Approved Securities-reg. IRDA/INV /CIR/036/2008-09 Investment in IFFCL Tax free Bonds – Approved Securities IRDA/INV /CIR/015/June 09 Investment in Indian Depository Receipts (IDR) IRDA/INV /CIR/193/09/2013 Investment in Infrastructure debt fund – NBFC IRDA/INV /CIR/194/09/2013 Investment in Infrastructure debt fund – Mutual Fund IRDA/INV /CIR/008/01/2014 Investment in M/s L&T Infra debt fund – NBFC IRDA/INV /CIR/250/11/2014 Investment in M/s India Infradebt Limited IDF – NBFC IRDA/INV /CIR/247/11/2012 Investment in Credit Default Swaps IRDA/F&I/CIR/INV/196/08/2014 Investment in Onshore Rupee Bonds issued by Asian Development Bank (ADB) and International Finance Corporation(IFC) IRDA/F&I/INV/CIR/138/06/2014 Investment in Interest rate derivatives IRDA/F&I/CIR/INV/063/02/2014 Bank’s capital instruments under Basel III – Investment by Insurance companies IRDA/F&I/CIR/INV/213/09/2014 Issue of long term bonds by banks – Financing of Infrastructure and affordable housing IRDA/INV/CIR/020/2008-09 Outsourcing of Investment function IRDA/FA /02/10/2003-04 IRDA/INC/CIR/006/2003-04 IRDA/CIR/F&A/079/Feb-05 Transfer of Investment IRDA/CIR /INV/062/JAN/05 Transactions on Stock Market on “Cash Basis” Page 98 of 100 Circular reference Description IRDA/INV/CIR /029/2005-06 Negotiated dealing system – Order Matching IRDA/F&I/CIR/INV/115/07/2010 Reporting of OTC transactions in certificates of Deposits (CDs) and Commercial Papers (CPs) – reg. IRDA-F&I-CIR-INV-034-02-2015 Transitory Investment Provisions - The Insurance Laws (Amendment) Ordinance, 2014 IRDA/F&I/CIR/INV/099/03/2014 Reporting of transactions in corporate bonds, commercial papers, certificate of deposits & securitised debt IRDA/32/2/F&A/Circulars/169/Jan/2006-07 Prudential norms for Income Recognition, asset classification and provisioning and other related matters IRDA-F&I-CIR-INV-053-03-2011 ULIP Fund Clearance IRDA/F&I/CIR/INV/173/08/2011 ULIP - Fund Clearance procedure and NAV process IRDA-F&I-CIR-INV-234-10-2011 Clarifications on Fund Approval Procedure and Guidelines on NAV Process IRDAI/F&I/CIR/INV/098/04/2021 Investments in Debt Securities of InvITs and REITs IRDAI/F&I/CIR/INV/008/01/2021 Credit Rating – Applicable for Infrastructure Investments IRDAI/F&I/CIR/INV/81/04/2022 Exposure of Insurers to Financial and Insurance Activities IRDAI/F&I/CIR/INV/246/09/2020 Implementing RFQ platform for Investments in Corporate Bonds/Commercial Papers IRDA/F&I/CIR/INV/222/12/2019 Guidelines for investment in Debt ETFs with CPSE Bonds as underlying IRDA/F&I/CIR/INV/085/04/2020 IRDA/F&I/CIR/INV/181/07/2020 COVID-19-Rescheduling of Term Loans IRDAI/F&I/CIR/INV/216/08/2020 IRDAI/F&I/CIR/INV/065/03/2021 IRDAI/F&I/CIR/INV/255/09/2021 IRDAI/F&I/CIR/INV/51/03/2022 Dividend Criteria for Equity Investment under “Approved Investment” IRDAI/INV/001/2021 Control & Monitoring Mechanism of Investment Operations- Work from Remote Location IRDAI/F&I/CIR/INV/165/8/2022 Amendments to Investment Master Circular Page 99 of 100 8. LIST OF CIRCULARS DISCONTINUED Date Circular reference Short Description 08-11-04 INV-CIR-046-2004-05 Investment in Equity Share through IPO 04-08-09 INV/CIR/23/2009-10 Audit of Investment & Risk Management system & Process, Concurrent Audit 27-09-09 INV-CIR-077-2009-10 Settlement of OTC trades in corporate bonds on DvP - 1 Basis 17-08-11 IRDA/F&I/CIR/INV/187/08/2011 Fund Approval Procedure and Guidelines on NAV Process 30-10-13 IRDA/F&I/INV/CIR/213/10/2013 Clarifications on IRDA Investment Regulations, 2000 (Fifth Amendment) INV/GLN/004/2003-04 Mutual Fund Investments INV/CIR/007/2003-04 Investment In Venture Fund – Reg. 10-09-07 INV/CIR/035/2007-08 FIMMDA Reporting Platform for Corp Bond Transactions INV/GLN/008/2004-05 Fixed Income Derivatives GUIDELINES - INV/GLN/003/2003-04 Market Value – Basis for FORM-3A / FORM-3B 27-10-08 21/IRDA/ACTL/ULIP/OCT-08 Money Market Instruments in Unit Linked Products 17-10-03 IRDA/INV/005/2003-04 Operation of CSGL Account 11-11-08 INV/CIR/020/2008-09 IRDA (Investment) (Fourth Amendment) Regulations, 2008 05-10-09 INV-CIR-040-2009-10 Approving MCX Stock Exchange as Recognized Stock Exchange 04-04-13 IRDA/F&I/CIR/INV/067/04/2013 IRDA (Investment) (5th Amendment) Regulations, 2013 Clarifications on IRDA (Investment) Regulations, 2000 INV/GLN/006/2003-04 Certificate U/S 28(2A), 28(2B) / 28B (3) Of Insurance Act, 1938 INV/CIR/031/2004-05 Outsourcing Of Investment Function INV/CIR/009/2003-04 Deposit Under Section 7 Of Insurance Act, 1934, Held In A Bank Belonging To “Promoter Group” Certification Of Section 7 Deposit Certification Of Section 7 Deposit – Reg 26-03-12 IRDA/F&I/CIR/INV/69/03/2012 Declaration of NAV, website Guidance note on preparation of investment returns 2013 03-03-14 IRDA/F&I/INV/CIR/028/01/2014 BAP - Investment Module 11-02-08 IRDA/Reg/3/44/2008 Infrastructure investment definition INV/GLN/005/2003-04 Statement of Investment Reconciliation INV/GLN/007/2003-04 Explanation on Definition of “Group” Page 100 of 100 Date Circular reference Short Description 28-12-04 INV/CIR/058/2004-05 Outsourcing Of Investment Function - Life Insurance 27-07-09 IRDA/INV/GLR/LR/001/2009-10 Clarification on Investments in Central Government Securities 26-12-08 IRDA/INV/CIR/027/2008-09 Relaxation in Investment Parameters of Debt/ Equity Segment 30-04-15 IRDA/F&I/CIR/INV/093/04/2015 Withdrawal of Deposit under Section 7 of Insurance Act 1938 8/RBI/05-06 Insurance sector’s exposure to the Capital Market 24-04-09 8-RBI-09-10 Insurance Sector's Exposure to Capital Markets 08/08/2013 IRDA-F&I-INV-CIR-155-08-2013 Exposure limits on the Investments in Housing Finance and Infrastructure Finance companies