The Insurance Regulatory and Development Authority of India issued a circular permitting insurers to expand their investment universe by investing in capital instruments issued by RBI-regulated All India Financial Institutions (AIFIs). Under the existing framework, insurers were already allowed to invest in Additional Tier 1 (AT1) bonds and Tier 2 capital instruments of banks. Following RBI’s decision to allow AIFIs to issue AT1 bonds and Tier 2 capital instruments from 1 April 2024 under the Basel III framework, IRDAI has now extended similar investment permissions to these AIFI instruments. Insurers may invest in AT1 bonds and in debt capital instruments and preference share capital forming Tier 2 capital of AIFIs, excluding perpetual cumulative preference shares. Such investments must comply with the same regulatory provisions applicable to bank instruments under the IRDAI Master Circular on Actuarial, Finance and Investment Functions, and insurers must use existing PSU bank investment category codes. The move aims to enhance portfolio diversification while maintaining regulatory consistency.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
Circular Ref.: IRDAI/F&I/CIR/INV/142/12/2025 Dated: 19th December, 2025
To,
All Insurers and Reinsurers
Sub: Permitting insurers’ investments in AT1 bonds and Tier 2 Capital of RBI regulated All India Financial Institutions (AIFIs)
Under the current regulatory framework, IRDAI allows insurers to invest in AT1 Bonds and Debt Capital Instruments and Preference Share Capital Instruments forming Tier 2 capital of Banks.
2. Further, RBI allowed All India Financial Institutions (AIFIs) to issue Additional Tier 1 Bonds and Tier 2 capital w.e.f 1st April,2024 under Prudential Regulations on Basel III Capital Framework.
3. IRDAI as part of continuous regulatory initiatives and to enable insurers to have wider scope for investments and portfolio diversification hereby permits investments in the following instruments issued by RBI regulated All India Financial Institutions (AIFIs).
i. AT1 bonds and
ii. Debt Capital Instruments and Preference Share Capital Instruments (except Perpetual Cumulative Preference shares) forming Tier 2 Capital.
4. Investments in the above instruments are to be made in line with existing provisions applicable to the insurers’ investments in banks which are covered under para 1.6(b) and (d) of Chapter 3 of Master Circular on Actuarial, Finance and Investment Functions of Insurers dt.17th May,2024.
5. The insurers are required to use the existing category codes specified for investments in the above instruments of PSU banks while making these investments.
This circular is issued in line with clause 12(6) of Schedule III of IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024.
Sd./-
(Ammu Venkataramana)
(General Manager)
