Irdai could change the norms for insurance consolidated investment

MUMBAI: The Insurance Regulatory and Development Authority of India (Irdai) has gained greater flexibility over insurers’ investment norms after amendments to the Insurance Act consolidated multiple investment-related provisions into a single section and shifted operational details to regulations. Sections 27A, 27B, 27C and 27D of the Act have been merged into a unified Section 27, simplifying the statutory framework governing insurers’ investments. While investments in central and state government securities will continue to be governed by the Act, other aspects will now be specified through regulations issued by the regulator.

The amendments also clarify that the prohibition on creating encumbrance or charge on assets backing policyholders’ liabilities will not apply to repo, reverse repo and securities lending transactions, providing insurers greater operational flexibility in managing liquidity.

In addition, the Act removes the blanket prohibition on investments in private limited companies, expanding the permissible investment universe, subject to regulatory safeguards.
“Earlier, many investment prescriptions were hard-coded in the Act. Now, barring government securities, the framework is regulation-driven,” said a senior insurance executive. “This allows the regulator to respond faster to market developments without frequent legislative changes.”

Assets Under Management (AUM) of the insurance sector reached Rs 74.4 lakh crore as on March 31, 2025. Also, the Reserve Bank of India (RBI) in its report on Wednesday said insurers remain heavily invested in sovereign debt. That provides safety, the RBI said, but such a conservative mix makes it harder to consistently meet policyholders’ return expectations, reducing the appeal of long-term insurance savings compared with other products offering better risk-adjusted returns.