IRDAI’s 2026 AIF clarification for insurers: Overview

On 12 February 2026, the IRDAI issued a clarification circular on how insurers can invest in AIFs when the fund may undertake overseas investments, utilising Exclusion Rights while still complying with Section 27E of the Insurance Act, 1938.

If insurer money is in your fund, the message is crystal clear:

Your process must demonstrate that insurer capital and proceeds are not invested outside India, supported by documentation, reporting and audit evidence.

The core problem IRDAI is solving

IRDAI’s existing framework already allowed insurers to invest in AIFs, but it required insurers to ensure their AIF investments do not result in overseas exposure under Section 27E.

In practice, many AIF strategies may include overseas opportunities, but the question is:

How do insurers participate in the fund without violating Section 27E when a fund does overseas deals?

IRDAI’s answer is a structured approach using Excusal Rights, paired with a strict operating framework that prevents any insurer capital from being drawn down, used, pledged or charged toward overseas assets.

What IRDAI clarified 

IRDAI’s clarification boils down to a few practical rules that make excusal rights enforceable in day-to-day fund operations and auditable under Section 27E.

1) Insurers can invest even if the AIF does overseas deals, but only if the excusal is airtight

IRDAI allows insurer investments in such AIFs if the insurer has “Excusal Rights” and the insurer’s proceeds are not invested outside India.

But IRDAI does not stop at intent. It demands an evidence trail.

2) The fund documents must hard-code the restriction

IRDAI requires a clause in the PPM stating that insurer capital and proceeds will not be drawn down, used or pledged for any investment outside India. In the annexure framework, this is described as hard-coding Section 27E into fund documents, including a “Statutory Exclusion” clause and a “Deemed Excusal” covenant in the contribution agreement.

3) There must be third-party verification

IRDAI requires confirmations and certifications, such as:

• Statutory auditors of the AIF confirming insurer capital is not invested outside India
• AIF compliance certificate confirming that excusal rights were validly invoked and no overseas costs were charged to the insurer
• Insurer's concurrent auditor certification of excusal rights compliance

4) Exposure limits must consider direct plus indirect exposure

IRDAI replaces a clause to clarify that the single AIF exposure limit must be complied with considering both direct exposure and indirect exposure through FoFs.

The operating framework IRDAI expects

The annexure is the real playbook. It lays out a “comprehensive operating framework” built around “zero contamination” of insurer capital.

A) Documentation level controls

You need the fund documents to explicitly define insurer capital as restricted and automatically excused from overseas opportunities.

B) Process flow controls

IRDAI expects the manager to run pre-drawdown checks and reporting that makes the excusal operational, not informal. Examples in the annexure include:

• The insurer provides a Section 27E declaration
• The manager flags the insurer as restricted domestic only in the investor register
• Before overseas drawdowns, the manager generates a drawdown eligibility schedule showing insurer allocation as zero
• Quarterly reporting includes a Section 27E compliance annexure showing insurer allocation as ₹0 and beneficial interest as 0% in overseas assets

C) Certification “three lines of defence”

IRDAI’s framework describes a three-tier certification model:

• Level 1: AIF compliance officer and manager quarterly certification
• Level 2: AIF statutory auditor annual certification, including economic segregation and no P and L attribution
• Level 3: Insurer concurrent or internal auditor quarterly verification using cash flow checks

Practical checklist for AIF managers and fund ops teams

Use this as a readiness scan aligned to what the circular actually expects.

Fund documentation readiness

• PPM includes a clear Section 27E exclusion clause for insurer capital and proceeds
• The contribution agreement includes a standing deemed excusal instruction for overseas opportunities
• Side letters, if used, do not conflict with the above

Deal and accounting readiness

• Every deal is tagged clearly as domestic or overseas
• Deal-specific overseas expenses are not pooled into general fund expenses and are excused from insurer allocation
• Accounting can support segregation so the insurer has zero attribution for overseas assets and related P and L

Capital call readiness

• You can generate a drawdown eligibility schedule that explicitly shows insurer allocation as zero for overseas calls
• You issue a negative confirmation-style notice to the insurer for overseas calls, stating their share is zero

Reporting and audit readiness

• Quarterly report includes a Section 27E compliance annexure with overseas totals and insurer allocation as ₹0
• AIF compliance certificate workflow exists for quarterly reporting
• Annual statutory auditor certification language and scope are agreed upfront
• Insurer concurrent auditor verification can be supported with clean evidence trails

Where Taghash fits

This circular effectively asks for a repeatable operating system:

• Investor level restriction flags
• Deal tagging and expense tagging
• Capital call calculations that handle exclusions cleanly
• Reporting packs that include the required annexures
• Audit trails that are easy to evidence

Taghash can support by turning this into a tracked workflow from document clauses and onboarding declarations to deal tagging and drawdown controls to quarterly reporting and certification packs, so teams can show compliance without spreadsheet firefighting.

About Taghash

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