Indian insurance companies are pushing for greater flexibility in how they can use equity derivatives for portfolio hedging, according to reports from The Economic Times. The insurers are specifically seeking to allow exposure to be aggregated across multiple funds rather than applying separate limits to each individual fund. This regulatory change could provide insurers with more practical tools for managing their overall equity portfolios through derivatives instruments.
The Insurance Regulatory and Development Authority of India (Irdai) introduced a framework in February 2025 that allows insurers to use equity derivatives solely for hedging existing equity exposures, as reported by The Economic Times. However, adoption of these instruments has remained limited more than a year after the framework was introduced, with only one life insurance company having used equity derivatives so far.
The current usage data reveals that only one life insurance company has utilized equity derivatives since the framework's introduction, with the transactions involving one or two deals according to sources cited by The Economic Times. This limited adoption suggests that insurers are still assessing the practicality and effectiveness of using derivatives for portfolio hedging in the current regulatory environment.
The regulator is currently weighing the additional safeguards needed before allowing wider use of equity derivatives by insurance companies, as reported by The Economic Times. Insurers are seeking changes to make derivatives more practical for long-term portfolio management, indicating a desire for more comprehensive frameworks that can support systematic hedging strategies rather than isolated transactions. The move could help insurers hedge their overall equity portfolios, but adoption remains limited despite the regulatory framework.
