The Insurance Regulatory and Development Authority of India (“Authority” or “IRDAI”) has issued a circular bearing reference number IRDAI/F&I/CIR/INV/142/12/2025, dated December 19, 2025, regarding Permitting insurers’ investments in AT1 bonds and Tier 2 Capital of RBI regulated All India Financial Institutions (AIFIs) (hereinafter referred to as ‘Circular’) . This initiative aims to provide insurers with greater portfolio diversification opportunities.
The key highlights of the Circular are as follows:
1. Expansion of Permissible Investments: Insurers are now permitted to invest in Additional Tier 1 (AT1) Bonds, Debt Capital Instruments, and Preference Share Capital Instruments (excluding Perpetual Cumulative Preference Shares) that form Tier 2 Capital, issued by RBI-regulated AIFIs
2. Alignment with RBI Regulations: This permission follows RBI’s allowance for AIFIs to issue AT1 Bonds and Tier 2 capital under Prudential Regulations on Basel III, starting April 1, 2024.
3. Compliance Requirements: Investments must adhere to existing provisions applicable to insurers’ investments in banks, as outlined in paragraphs 1.6(b) and (d) of Chapter 3 in the Master Circular on Actuarial, Finance and Investment Functions of Insurers dated May 17, 2024.
4. Reporting and Categorization: Insurers should use the existing category codes specified for investments in Public Sector Undertaking (PSU) banks when making these investments.
5. Regulatory Basis: The circular is issued under clause 12(6) of Schedule III of the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024, as part of IRDAI’s ongoing efforts to enhance regulatory initiatives and investment scope.
Source category: IRDAI
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