IRDAI Proposes Higher Investment Limits in REITs, InvITs, and Gold ETFs

In a move aimed at channeling more long-term insurance capital into real estate, infrastructure, and gold-backed assets, the Insurance Regulatory and Development Authority of India (IRDAI) has proposed revisions to investment norms for insurers.

Key Proposals by IRDAI

Doubling Exposure Limits to REITs and InvITsREITS and INVITS

• Current cap: 3%
• Proposed cap: 6%
  • Life insurers: 6% of own fund size
  • General insurers: 6% of total investment assets
• Objective: Mobilize long-term funds for real estate and infrastructure projects through pooled vehicles.
• Public float requirement: To be reduced from 30% to 25%, aligning with SEBI norms.

Gold ETFs to Be Allowed in ULIPs

• New provision: Up to 5% of a segregated ULIP fund’s assets can be invested in gold exchange-traded funds (ETFs).
• This is within the overall mutual fund cap of 15%.
• Why now?
  • Gold has returned 30% in the past year, outperforming equities and fixed deposits.
  • Two large life insurers had requested this inclusion.

Regulatory Developments: Kiwi General Insurance

• Kiwi General Insurance, backed by Westbridge Capital, has received R1 approval from IRDAI — the first regulatory stage toward a general insurance licence.

Other Key Actions by IRDAI

• Constituted panels of Whole-Time Members to:
  • Review share transfer applications
  • Investigate violations of Insurance Act by insurers and intermediaries
• Reviewed implementation of the Indian Risk-Based Capital (IRBC) regime
  • Discussed insurer feedback from QIS-1 (Quantitative Impact Study)

Significance of IRDAI's Reforms

• Aligns insurance sector with India’s infrastructure push
• Improves investment flexibility for life and general insurers
• Encourages portfolio diversification, including inflation hedges like gold
• Reinforces IRDAI’s shift toward a risk-based supervision regime

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