IRDAI Clarifies Norms for Insurer Investments in AIFs

Cir No.IRDAI/F&I/CIR/INV/28/2/2026; Dated: 12.02.2026

The Insurance Regulatory and Development Authority of India (IRDAI) has issued a clarification regarding investments by insurers in Alternative Investment Funds (AIFs) to ensure compliance with statutory restrictions on overseas investments.

The clarification outlines specific documentation and compliance requirements to prevent indirect overseas exposure through AIF structures.

1. Declaration by Insurers Citing Section 27E of the Insurance Act

Insurers investing in AIFs must provide a formal declaration stating:

Their inability to participate in overseas investments of the AIF
Such restriction arises under Section 27E of the Insurance Act, 1938

This declaration formally records the regulatory limitation applicable to insurers’ investment portfolios.

2. Mandatory Clause in Private Placement Memorandum (PPM)

The AIF’s Private Placement Memorandum (PPM) must include a specific clause stating that:

Capital received from the insurer (including proceeds)
Shall not be drawn down, utilised, or pledged
For any investment outside India

This clause ensures ring-fencing of insurer funds within domestic investments.

3. Certification by Statutory Auditors of AIF

The statutory auditors of the AIF are required to confirm that:

Capital contributed by the insurer
Has not been invested outside India

This certification strengthens independent verification of compliance.

4. Compliance Certificate from AIF

Insurers must obtain a compliance certificate from the AIF confirming that:

All overseas investments of the AIF have been disclosed to the insurer
Excusal rights relating to overseas investments were validly invoked for the insurer
No costs or expenses related to overseas assets were charged to the insurer

This ensures transparency and protects insurers from indirect exposure to overseas investments.

5. Regulatory Objective

The clarification aims to:

Ensure compliance with statutory investment restrictions applicable to insurers
Prevent indirect overseas exposure through pooled investment vehicles
Strengthen transparency and accountability in AIF structures
Enhance monitoring of insurer investments

6. Key Takeaway

Insurers investing in AIFs must ensure strict segregation of their funds from overseas investments through formal declarations, PPM safeguards, auditor confirmations, and compliance certificates, in line with IRDAI’s clarified regulatory framework