Investments in Debt Securities of InvITs and REITs

Last updated: 24 April 2021

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Insurers are now permitted to invest in the debt securities issued by Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). New regulations specify that these debt instruments must be rated 'AA' or higher to be considered approved investments. Investments below 'AA' will be classified as 'Other Investments'. There are also limits on the percentage of a single issue an insurer can hold and a cap on cumulative investments in both units and debt instruments of InvITs and REITs relative to the insurer's total fund size. Specific rules apply regarding investments in entities where the sponsor is part of the insurer's promoter group.

Insurance Regulatory and Development Authority

Ref. No: IRDAI/F&I/CIR/INV/098/04/2021

Date: 22-04-2021

CIRCULAR

Investments-Master Circular permits insurers to invest in Units of listed Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). Consequent to Finance Act, 2021 permitting Trusts to issue Debt Securities, the following conditions shall apply to Insurers investing in “Debt Securities” issued by InvITs / REITs:

a. The Debt Instruments of InvIT / REIT shall be rated and not less than “AA” as a part of Approved Investments.

b. Debt Instruments of InvITs / REITs rated and or downgraded below “AA” shall form part of Other Investments.

c. No insurer shall invest more than 10% of the Outstanding Debt instruments (including the current issue) in a singleInvIT/REITs issue.

d. The cumulative Investments in Units and Debt Instruments of InvITs and REITs shall not exceed 3% of total fund size of the Insurer at any point of time.

e. No investment shall be made in Debt instruments of an InvIT/REIT where the Sponsor is under the Promoter Group of the Insurer.

f. Group shall have the meaning as defined under Regulation 2(g) of IRDAI (Investment) Regulations, 2016

g. Investment in Debt Instruments of InvIT will form part “Infrastructure Investments”.

h. Investment in Debt Instruments of REIT will form part of industry group “Real Estate Activities” under NIC Industry Classification.

i. 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.

j. The codes applicable under Category of Investment (COI) for Debt Instruments of InvITs and REITs are:

Approved Investments

i. D42: Debt Instruments of InvITs – IDIT

ii. D43: Debt Instruments of REITs – EDRT

Other Investments

i. E31: Debt Instruments of InvITs – IOIT

ii. E32: Debt Instruments of REITs – ODRT

k. The Concurrent Auditor in his Quarterly Report to the Audit Committee / Board of the Insurer shall specifically confirm compliance to ALL the above norms.

Sd/-
(S. N. Jayasimhan)
HoD-Investments

FAQ :

Debt instruments of InvITs/REITs must be rated not less than 'AA' to be considered part of Approved Investments.

Debt instruments rated or subsequently downgraded below 'AA' will be classified as 'Other Investments'.

No insurer shall invest more than 10% of the outstanding debt instruments (including the current issue) in a single InvIT/REITs issue.

The cumulative investments in both Units and Debt Instruments of InvITs and REITs shall not exceed 3% of the total fund size of the Insurer at any point in time.

No investment shall be made in debt instruments of an InvIT/REIT where the Sponsor is under the Promoter Group of the Insurer.

Investments shall be valued either as per FIMMDA or at applicable market yield rates published by any SEBI-registered Rating Agency.

Notification No : IRDAI/F&I/CIR/INV/098/04/2021
Source : https://www.irdai.gov.in/admincms/cms/whatsNew_Layout.aspx?page=PageNo4454&flag=1

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