Irdai proposes allowing insurers to invest up to 20% in infra SPV debt
Dec 18, 2025
Irdai noted that once infrastructure projects begin commercial operations, their cash flows become more predictable and regulated, significantly reducing funding risks
The Insurance Regulatory and Development Authority of India (Irdai) on Thursday proposed permitting insurers to invest up to 20 per cent of their funds in debt instruments issued by public limited special purpose vehicles (SPVs) operating in the infrastructure sector, provided the project has commenced commercial operations and its cash flows have stabilised.
According to the draft proposal, the proceeds from such debt issuances must be used exclusively to refinance existing debt or loans of the SPV. The underlying debt must be classified as standard in the lender’s books, and the issued instruments must carry a minimum credit rating of AA to qualify as approved investments.
“Notwithstanding the provisions mentioned in Note IV above, insurers are allowed to invest a maximum of 20 per cent of the debt issued by a public limited SPV engaged in the infrastructure sector where the project has commenced commercial operations and cash flows have stabilised, or the amount specified under Clause 8(2)(a), whichever is lower,” Irdai said in the draft.
The regulator noted that once infrastructure projects begin commercial operations, their cash flows become more predictable and regulated, significantly reducing funding risks. At this stage, SPVs typically possess both operating assets and stable revenue streams, making them suitable for long-term investors.
Irdai added that such projects often witness the exit of original lenders, creating opportunities for long-term investors like insurers. These assets offer attractive risk-adjusted returns, often benefit from near-monopolistic market positions, and carry low technological obsolescence risk, aligning well with insurers’ long-term liability profiles and asset-liability management needs.
The regulator has invited comments and suggestions from stakeholders within 21 days of the circulation of the draft, particularly on the adequacy of the proposed framework to support SPV funding structures in viable infrastructure projects and the disclosures required to ensure adequate in-built risk mitigation.
[The Business Standard]
