News Regulations04 Dec 2017

India:Rules imminent governing private equity firms as insurers' promotors

04 Dec 2017

Guidelines are expected to be issued by the IRDAI this week and even as early as today that will allow private equity (PE) and venture capital (VC) firms to promote insurance companies.

Among other provisions, there will be a lock-in period of five years for the PE firms, reported MoneyControl.

"We will allow PE/VC firms to become promoters of insurance companies with a five-year lock-in period. However, they can only act as promoters through a special purpose vehicle (SPV) and abide by the Indian-owned and controlled guidelines," a senior IRDAI official said, adding, "Further, they should commit to fulfilling whatever additional capital needs there are."

In September 2017, IRDAI Chairman TS Vijayan had said that short-term investments including those by PE firms are under discussion and that the regulator might arrive at a decision on this in a month or so.

As per current regulatory norms, firms holding a stake of 10% or more in an insurance company are classified as promoters while those holding less than that are called investors.

Licensing

In the IRDAI board meeting held last Wednesday on which the subject was discussed, two R1 or first stage of licence applications were approved for Jiva Health and O Care Health as standalone health insurance operations. In addition, Reliance Health Insurance's second stage or R2 application was approved. Allianz Global's reinsurance branch licence was also given preliminary approval.

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