Clarifications on provisions with respect to investment in Alternative Investment Funds (AIFs)
February 12, 2026
1. Under the current provisions of para 1.5 of Master Circular on Actuarial, Finance and Investment Functions of Insurers, dated 17th May, 2024, IRDAI allows insurers to invest in Alternative Investment Funds. The existing provisions inter alia stipulate the following:
i. Insurer shall invest only into Fund of Funds (FoF) which comply requirement of Section 27E of the Insurance Act, 1938;
ii. Insurer shall ensure compliance with Section 27E by a clause in the Fund Offer Documents executed by FoF to restrain such FoF investing into AIFs which invest in overseas companies/funds;
iii. Insurers should ensure that AIFs do not invest in securities of companies incorporated outside India to comply with the provisions of Section 27E of the Insurance Act,1938;
iv. No Insurer shall invest in an AIF, which in turn has exposure to a FoF, in which the Insurer has taken an exposure.
2. Insurers have been requesting for clarifications the above provisions in respect of investing in AIFs with “Excuse rights” and investee limits for direct and indirect exposure through Fund of Funds (FoF). In view of the requests and to broaden the avenues for insurers’ investments in AIFs, the following clarifications are provided –
a) Compliance with the following conditions will satisfy sub paras 4(b),(c) and 5 of para 1.5 of Master Circular on Actuarial, Finance and Investment Functions of Insurers:
i. The insurers’ investments in such AIFs are with “Excusal Rights” as per SEBI Circular SEBI/HO/AFD-1/PoD/P/CIR/2023/053 dt.10th April, 2023 as amended from time to time and proceeds of the insurers’ investments are not invested outside India by such AIFs.
ii. At the time of investing, the insurer must provide a formal declaration citing Section 27E of the Insurance Act,1938 as the basis for their inability to participate in overseas investments of AIF;
iii. There shall be a clause in Private Placement Memorandum stating that the Capital (including any proceeds) received from Insurer shall not be drawn down, utilized or pledged for any investment outside India;
iv. Statutory auditors of AIF shall confirm that the capital of the insurer is not invested outside India;
v. Insurer shall obtain a compliance certificate from the AIF confirming that all overseas investments are disclosed to the insurer, the “Excusal Rights” were validly invoked for insurer’s investments and no cost related to overseas assets were charged to the insurer.
vi. Concurrent Auditor of the insurer shall certify the compliance of the provisions of “Excusal Rights” with respect to insurer’s investment in AIFs having outside India Exposure.
A reference framework on points (i) to (vi) above to be suitably adopted by insurers is placed at Annexure.
b) Sub para 4(d) of Para 1.5 of Master Circular on Actuarial, Finance and Investment Functions of Insurers is replaced by the following provision:
“Insurer shall ensure compliance with the single AIF exposure limit specified under column (c) of table under sub para 7 below in respect of their direct exposure and indirect exposure (through Fund of Funds) into such single AIF”.
This circular is issued with the approval of the Competent Authority.
