Norms For Private Equity Investments In Insurers In A Month, Says IRDAI Chief

India's insurance regulator will lay down rules for private equity firms promoting insurers after several such investors picked up stakes over the past few months.

“There are two categories, one where there is an investor in an insurance company holding less than 10 percent stake and the other is a promoter. We are looking at these investments and their feasibility and we will come to a decision in a month or so,” TS Vijayan, chairman of Insurance Regulatory and Development Authority of India, said on the sidelines of an ASSOCHAM event in Mumbai. “We have put a team, we are legally examining it.”

“A direction from the insurance regulator would be to decide the ‘fit and proper promoter' criteria for private equity funds looking to pick up majority stakes in insurance startups in India,” said Nidhesh Jain, insurance analyst at broking firm Investec Bank Plc. In order to make sure that the capital is invested to support the long-term growth of insurance companies and for safeguarding the interest of policyholders, these guidelines may look to curb premature exits made by PE investors, he said.

Private equity firms have bought stakes in insurance companies as investors expect more domestic savings to shift from physical assets like gold and real estate to financial instruments like mutual funds and insurance. Last year's demonetisation and the subsequent cap on cash transactions have increased the pace, according to an RBI study.

Narayan Murthy's Catamaran Ventures-backed digital insurance company Acko General Insurance is one such firm that received IRDA's approval on September 18.

ICICI Lombard Insurance Company's former promoter Fairfax Financial Holdings sold a 12.18 percent stake to private equity firms Warburg Pincus LLC, Tamarind Capital Pte and IIFL Special Opportunities Fund in May. Private equity firms KKR and Co. L.P and Temasek Holdings Pte Ltd. acquired around 4 percent stake in SBI Life in December.

Religare Health Insurance Co. Ltd. sold nearly 80 percent of its stake to a consortium of PE investors led by investment firm True North (formerly known as India Value Fund) in April. Similarly, private equity funds managed by Apis Partners hold a minority stake in Star Health and Allied Insurance Co. Ltd.

Also Read: Are India's Private Life Insurers Too Reliant on ULIPs For Growth?