Life insurers see the shine, seek Irdai nod to invest in gold ETFs – Delhi News Daily

Mumbai : Several life insurers have approached the Insurance Regulatory and Development Authority of India (Irdai) seeking approval to invest in gold exchange-traded funds (ETFs), according to people familiar with the matter. The move comes amid increasing gold prices, growing global demand and a need for diversification as traditional asset classes deliver subdued returns.

Gold ETFs have delivered returns of more than 30% over the past 12 months. In comparison, liquid debt funds, equity indices like the Nifty and traditional bank fixed deposits have offered modest returns in the 5-8% range.

“The sharp contrast in performance is pushing us to explore gold ETFs under unit-linked insurance plans (ULIPs) to improve portfolio returns and add a hedge against market uncertainty,” an insurance executive who had sent this recommendation to the regulator said on condition of anonymity.

ULIPs offer flexibility to policyholders to allocate funds across equity, debt and balanced options, depending on their risk appetite. Insurers want the Irdai to allow them to invest 3-5% of their ULIP assets under management in gold ETFs. The life insurance industry currently has ₹70 lakh crore in assets under management. In response to recent requests, the insurance regulator advised companies to route their proposals through the Life Insurance Council, the industry body representing life insurers.

The regulator asked for a detailed proposal with risks and proposed mitigation measures. It will take a decision after reviewing the industry-wide proposal. Its approval would widen the investment universe for insurers, offering them access to an asset class that is increasingly seen as a rewarding safe haven amid global uncertainty.

Following the economic shocks triggered by the Covid-19 pandemic and rising geopolitical tensions, gold has become a strategic reserve asset for many countries. Central banks worldwide have increased gold purchases.

In 2024-25 alone, the Reserve Bank of India (RBI) bought 57.5 tonnes of gold, the second-highest addition in a year since 2017. Over the past five years, the RBI’s gold holdings increased 35% to 880 tonnes at the end of FY25 from 653 tonnes in FY20.

Gold now accounts for about 12% of India’s total foreign exchange reserves, up from 6.86% in 2021, according to the World Gold Council. Separately, the insurance industry is pushing for longterm investment options, seeking approval to invest in zero-coupon bonds and longer-tenure corporate debt, particularly from infrastructure firms. While insurers can already invest in government securities, equities, equity derivatives and infrastructure, they face a shortage of long-dated instruments to match long-term liabilities.

Most infrastructure firms issue fiveyear debt, which insurers find too short. Insurers have urged the government to issue 20and 30-year sovereign zerocoupon bonds. Over the past 25 years, gold has given a return of 20 times.