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Informist, Saturday, Jun. 20, 2026

 

MUMBAI – The Insurance Regulatory and Development Authority of India Friday proposed allowing insurance companies to partake in repo transactions to facilitate liquidity management, while also allowing them to gain income through fees on lending of surplus government securities, the regulator said in a consultation paper. This proposed "IRDAI (Actuarial, Finance and Investment Functions of Insurer), (Second Amendment) Regulations, 2026" would effectively allow insurers to borrow funds through the collateralised tri-party and repo markets. The regulator has invited feedback on the proposed amendment by Jul. 10. 

 

Currently, insurance companies are only allowed to 'invest', or lend in tri-party repo and reverse repo transactions, as per IRDAI's norms on investment functions of insurers, which were effective April 2024. The norms do not provide for repo transactions. This is despite the Reserve Bank of India allowing 'any regulated entity' — which includes those regulated by IRDAI — to be an eligible participant in market repurchase transactions, as per its latest master direction on the same issued in November 2025. 

 

As per the Reserve Bank of India Act, 'repo' refers to borrowing funds by selling securities, with an agreement to repurchase the bonds on a future date for a price that includes interest for the funds borrowed. 'Reverse repo' pertains to lending funds by buying bonds with the respective agreement to resell them.

 

The regulator has proposed a gross combined limit for repo transactions and lending of government bonds for any point in time, either at 10% of bonds available outside regulatory investment requirements, or INR 100 billion, whichever is less. The RBI's existing directions on repo and lending of government securities will be applicable, the paper said.

 

Life insurers cannot exceed 10% of all funds in reverse repo transactions of corporate bonds, it said. Exposure to these transactions should also not exceed 10% of the size of an individual segregated fund, it said. Reverse repos in corporate debt should also not be more than 10% of investment assets of a general insurance firm, including re-insurers, health insurers or foreign re-insurers. Current prudential limits on insurers' investments would also apply to corporate bond repos. Reverse repos in government bonds are not subject to the 10?p, the paper said. 

 

The aim of the amendment is to align current norms with the Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Act, 2025, the paper said. The amendment also proposed an investment cap of 5% of shareholders' funds available beyond solvency margin in private limited companies that have a minimum net worth of INR 250 million. The regulator also proposed a limit of 5% of investment assets in a company owned or controlled by the promoter.  

 

The paper also proposed bringing the processes for disclosure, appointment and functioning of actuaries under regulatory purview. The amendment also extended requirements for submitting reports on a firm's financial condition and claim reserves to all insurers. The paper listed the procedure for evaluating and distributing surplus along with the format of a new valuation balance sheet for all insurance companies.  End

 

Reported by Cassandra Carvalho

Edited by Avishek Dutta

 

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