Regulator Irdai on Friday permitted insurers to use equity derivatives to hedge their portfolios, a move aimed at reducing risk in a volatile capital market. Insurance Development and Regulatory Authority of India (Irdai) has issued the 'Guidelines on Hedging through Equity Derivatives' following representations from insurers. "This move aims to facilitate insurers to hedge their existing equity exposures against volatility in equity market and ensure preservation of market value of equity investments and thereby reducing risks in equity portfolio," it said. Under the current regulatory framework, Irdai allows insurers to deal in Rupee Interest Rate Derivatives in the form of Forward Rate Agreements (FRAs), Interest Rate Swaps and Exchange Traded Interest Rate Futures (IRFs). Besides Fixed Income Derivatives, insurers are also permitted to deal in Credit Default Swaps (CDS) as protection buyers. "As there is an increasing trend in investments in equity market by insurers and owing