Indian insurance companies are seeking expanded flexibility in the use of equity derivatives for portfolio hedging. A key demand is to allow exposure limits to be aggregated across multiple funds rather than applying separate limits to each fund.
The move would enable insurers to hedge broader equity portfolios, aligning hedging capacity with the larger and more diversified investment allocations used by insurers. Adoption of equity derivatives for hedging, however, remains limited at present.
Regulatory context: In February 2025, the Insurance Regulatory and Development Authority of India (Irdai) allowed insurers to use equity derivatives solely for hedging existing equity exposures. This regulatory stance underpins the industry’s current push for greater hedging flexibility.
Implications for stakeholders: If granted, aggregated hedging limits could affect insurers’ risk management, capital efficiency, and balance-sheet stability. Regulators would likely monitor the impact on solvency and investment risk management, as well as any implications for policyholders and investors.
