Insurance reforms may see PE funding surge in sector – Times of India

MUMBAI: Insurance regulator Irdai’s proposal to allow private equity (PE) funds to promote insurance companies will result in significant capital inflows into the sector. Opening the doors for private equity funds was part of a wide range of reforms announced by Irdai on Friday, including reducing the capital requirement for insurers on some social insurance schemes.
During liberalisation insurance companies from developed markets were key investors in the sectors, however, private equity funds are the ones with deep pockets currently. Till now PE funds could not promote insurance companies, and there was also a cap of 10% on a single investor. The Irdai on Friday said that special purpose vehicle (SPV) route was optional for PE promoters, indicating that they could now invest directly. Also, investors can now pick up to 25% of the paid-up capital without being treated as promoters.

“The increase of threshold to 25% from 10% stake for being treated as investors and making SPV structure optional will bring the sector on the road map of a wider base of institutional investors,” said Nithya Easwaran, MD, Multiples Alternate Asset Management. “The ‘fit and proper’ criteria will ensure that high quality, responsible, and experienced institutional investors will become significant stakeholders and partner with the companies through the transition to a more open architecture and innovative industry structure,” she added.
Sequoia Capital MD Ishaan Mittal said, “The relaxation for funds will help attract a higher flow of capital to India’s insurance sector, resulting in greater innovation, deeper insurance penetration, and better offerings.”
“The amendments will make the sector a hotbed for investments and make it more investor-friendly in the coming years,” said Digit Insurance chairman Kamesh Goyal. Digit Insurance is promoted by Prem Watsa‘s Fairfax Group and Goyal.