IRDAI has recently allowed the insurance companies to invest in debt securities of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). Earlier, insurance companies were only allowed to in units of InvITs and REITs. This decision has been taken by IRDAI post the passage of the Finance Bill, which had proposed permitting trusts to issue debt securities.
The regulator has said that insurers can invest in debt securities of InvITs and REITs that are rated not less than ‘AA’ under the ‘approved investment’ category. In the event of a subsequent downgrade, the instrument will become part of their ‘other investments’.
The regulator has also specified that the cumulative investment of insurance companies in units and debt instruments of InvITs and REITs cannot exceed 3% of their total fund size at any point in time.
IRDAI said, “No insurer shall invest more than 10 per cent of the outstanding debt instruments (including the current issue) in a single InvIT/REITs issue.”
Also, if the sponsor of the InvITs and REIT is also the promoter of an insurance company then that company cannot invest in the debt instruments of such InvITs and REITs. IRDAI has also instructed that investment by insurers in the debt instruments of InvIT will be classified as ‘Infrastructure Investment’ while investment in debt instruments of REITs will form part of industry group ‘Real Estate Activities’ under NIC industry classification.