The scandal came after Irdai allowed insurers in March to invest in units of these integrated investment vehicles.
The Insurance Regulatory and Development Authority of India (Irdai) which allows insurers on Thursday to invest in loans related to infrastructure investments (InvITs) and real estate investment trusts (Reits) is expected to improve the overall yield of portfolio held by firms. , while providing additional long-term funding in the real estate sector.
The scandal came after Irdai allowed insurers in March to invest in the units of these integrated investment vehicles.
“This initiative gives insurance companies an additional opportunity to invest in quality infrastructure. By the nature of their business, insurance companies are long-term players, which is why they are eligible for investment in long-term infra projects, "said Arun Srinivasan, head of fixed income, ICICI Prudential Life Insurance Co. Ltd.
Irdai in a letter released on April 22 said that insurers cannot invest in InvIT debt instruments and Reits ratings under the AA as part of the approved investment.
Tools rated or downgraded under AA should be part of the ‘other funds’.
Insurance companies can invest in InvIT bonds or Reits of any rates, but if it is below AA, it becomes part of the other unauthorized funds, and above AA is estimated, it is approved.
According to Irdai, 75% of insurers' funds should be in AAA-rated assets, while 25% can go to AA or A-rated assets. In addition, the insurer may take the disclosure of instruments under AA only after obtaining approval from the board.
However, insurance companies generally adhere to AAA-rated instruments such as government safety. Most Reits and InvITs have been issued with AAA.
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Irdai also said that insurers cannot invest more than 10% of the remaining debt instruments in one InvIT or Reit.
“The current attractive distribution of these structures makes it a powerful proposition. Investing in these bonds will improve the overall yield of the portfolio in a risk-adjusted manner. In our view, this initiative will go a long way in supporting economic growth, "Srinivasan said.
Anuj Puri, chairman, Anarock Property Consultants, added: “Refunds and Invit are in the very first category in India. In the meantime, insurance companies intend to invest in this major development as it repeats the long-term growth story of Reits and InvITs and will also provide long-term stable funding. In fact, insurance and pension funds are known as ‘capital’ providers accurately because they invest for a long time. For Indian Reits and InvITs, this is a really good development. "
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