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D;idtlti inlai ~ 1ufl ti mm f¾ R ti I~ ch 3ITT f¾ ch lfi ~ INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA CIRCULAR Date: 30th Nov, 2016 REF: IRDAI/CIR/F&I/INV /13,/11/2016-17 As per Section 14 (2) (k) of IRDA Act, 1999, the Authority is empowered to issue amendments to Master Circular - Investments, 2016. This shall be effective from the date of issue of this Circular: A. Investment in "Additional Tier 1 (Basel Ill Compliant) Perpetual Bonds" [ATl Bonds] 1. Insurers can invest in 'Additional Tier 1 (Basel Ill Compliant) Perpetual Bonds [ATl Bonds], which conform to the following: i. The rating of ATl Bonds shall be not less than "AA", at the time of investment ii. The Offer document, in the case of IPOs of ATl Bonds, shall have a provision for listing in at least one of the Exchanges iii. The Insurer shall invest in not more than 10% of ATl Bonds offered through IPO. Further, the aggregate value of ATl Bonds held in any particular Bank, at any point of time, shall not exceed 10% of the total outstanding A Tl Bonds iv. The Common Equity Tier I Capital (CET) including Capital Conservation Buffer, of the issuer Bank shall be more than 1% the minimum CET prescribed by RBI, at the time of investment in ATl Bonds of such Bank v. Insurers can invest in ATl Bonds, only where such Banks have declared dividend for the preceding 2 years vi. The ATl Bonds shall be forming part of "Equity" in compliance with IRDAI (Investment) Regulations, and Master Circular issued thereunder vii. No investment shall be done in ATl Bonds, where the issuer Bank is either under the Promoter Group of Insurer or Corporate Agent of the Insurer 2. The Investment in ATl Bonds shall be valued either as per FIMMDA or at applicable Market Yield Rates published by any Rating Agency registered with "SEBI" 3. The following shall be the Category Codes (COi) for ATl Bonds: ATl Bonds as part of "Approved Investments" D 38: Additional Tier 1 (Basel Ill Compliant) Perpetual Bonds - [PSU Banks] - EAPS D 39: Additional Tier 1 (Basel Ill Compliant) Perpetual Bonds - [Private Banks] ~~ - EAPB ,. l:l"ftw:r 'll<R, -eftmrCK'f, <il !'<fl(<il l'I , ~-500 004. ~ ({) : 91-040-2338 1100, W-ffi: 91-040-6682 3334 i-i@: irda@irda.gov.in ~ : www.irda.gov.in Parisharam Bhavan, 3rd Floor, Basheer Bagh, Hyderabad-500 004. India. Ph.: 91-040-2338 1100, Fax: 91-040-6682 3334 E-mail : irda@irda.gov.in Web.: www.irda.gov.in ATl Bonds as part of "Other Investments" E 27: Additional Tier 1 (Basel Ill Compliant) Perpetual Bonds - [PSU Banks] - OAPS E 28: Additional Tier 1 (Basel Ill Compliant) Perpetual Bonds- [Private Banks] - OAPB 4. The Concurrent Auditor in his Quarterly Report to the Audit Committee / Board of the Insurer shall confirm that all the above norms and disclosure requirement have been complied with. B. Insurers to participate in Joint Lenders Forum (JLF) formed under RBI Guidelines The Authority permits Insurers to participate in JLF, which is formed under RBI Guidelines for loan accounts which could turn into potential NPAs. Through this mechanism, Insurers may take, need based exposure with the prior approval of the Insurers Board, which may be in excess of exposure permitted under extant IRDAI {Investment) Regulations Insurers shall file, along with Quarterly Periodical Returns to IRDAI, the following information, as under, apart from making necessary disclosure in Notes to Accounts of Financial Statements. Exposure % of Date of Comments of Name of Date of as on the Additional exposure in Approval Board on Insurers date of Exposure No the excess of by the Additional Entity entry Insurers as decided IRDAI (Inv) Insurers Exposure intoJLF entry into in JLF JLF Regulations Board permitted C. Amendment to Provision on "Exposure to Credit Default Swap" The following provisions shall be substituted for Provision of 1.8.a.2.c of Master Circular - Investments, 2016 "On purchase of protection, the exposure with respect to reference entity shall shift to "Protection Seller" to the extent of "Protection Purchased" within Regulation 9 of the IRDAI (Investment) Regulations, 2016 and such exposure shall form part of BFSI Sector, under Industry Sector Exposure ['{°' 1/. V R IYER ~ Member {F&I)