The Insurance Regulatory and Development Authority (IRDA) may make its regulations governing insurance companies’ investment in infrastructure projects more flexible.
It is reported that this is likely to happen in response to a suggestion from the Planning Commission that insurance companies should invest Rs 25,000 crore in infrastructure over the next five years.
IRDA’s investment regulations make it mandatory for insurance companies to invest up to 15 per cent of their investible surplus from traditional insurance plans in the infrastructure sector including power, road, port, dams and housing and construction projects.
Such investments are illiquid and long term. The projects have long gestation periods and returns are lower. As for the safety of the projects, IRDA has specified that 75 per cent of the infrastructure investment should be in AAA-rated bonds.
Last year, IRDA allowed Life insurance companies to increase their stake in infrastructure companies from 10 per cent to 20 per cent. Insurers can hold a maximum 10 per cent in any one company in case of listed companies.
To raise funds for infrastructure, a report prepared by Mr Deepak Parekh Chairman Housing Development Finance Corporation (HDFC) has suggested that all pension and insurance funds should invest in the infrastructure debt market.
The committee has suggested a
Rs 2,00,000 crore infrastructure corpus should be set up as a venture capital fund (VCF), to be managed and regulated by the Securities and Exchange Board of India (SEBI).

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