HomeBusinessPrivate equity funds can invest directly in insurance companies: IRDAI

Private equity funds can invest directly in insurance companies: IRDAI

India’s insurance regulator IRDAI has approved proposals ranging from allowing private equity funds to invest directly in insurance companies to allowing promoters to reduce stake up to 26% to raise capital such as subordinated debt and preference shares.

Apart from measures to improve ease-of-doing business, the regulator cleared a proposal to increase the limit of tie-up for intermediaries.

Among the company-specific proposals that got the approval of the Authority in its 120th Board meeting here, the final approval for listing was given to Go-Digit General Insurance Company; In-principle approval for the listing of IndiaFirst Life Insurance Company as well as the merger of Exide Life Insurance Company with HDFC Life Insurance Company.

Also, the regulator allowed the registration of Kshema General Insurance Company. The company will start operations soon. The Insurance Regulatory and Development Authority of India said that a total of 19 applications are in the pipeline at various stages, of which one is expected to be approved in the next meeting.

Elaborating on some of the approved proposals, IRDAI said investment through special purpose vehicle is being made optional for PE funds to invest in insurers. Thus they can invest directly. In another decision, investments up to 25% of the paid-up capital by a single investor (50% for all investors collectively) will now be considered as ‘investors’. Investments above this would be treated as promoter only. Till now, this limit was 10% for individual investor and 25% for all investors collectively.

The new provision allowing promoters to reduce their stake to 26% will, however, be subject to the condition that the insurer has a satisfactory solvency record for the last five years and is a listed entity. Similarly, the regulator also allowed subsidiaries to become promoters of insurance companies subject to certain conditions.

access to capital

IRDAI said that in addition to doing away with the requirement of prior approval for raising subordinated debt and/or preference shares, it is approving an increase in the limit for raising such capital – from 25% to 50% of the paid-up capital plus premium, Net worth of the company subject to 50%. This is expected to enable the companies to raise the required capital in time. The authority said the amendments have been introduced to provide for oversight of the board in raising such capital.

On the listing of insurers, IRDAI said the move will help raise capital along with increasing transparency, efficiency and accountability of insurers.

wide reach

Stating that it is committed to enable ‘insurance for all’ by 2047, IRDAI said that to enable greater access to insurance, the number of tie-ups for corporate agents and insurance marketing firms (IMFs) will be increased. Has been A corporate agent can tie up with nine insurers, as against three permitted at present, while an insurance marketing firm can tie up with six insurers in each of life, general and health sectors for distribution of its insurance products as against two allowed so far Can make alliances. , The area of ​​operation of marketing firms has also been expanded to cover the entire state in which they are registered.

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