Monday, November 28, 2022

Insurance reforms may result in an increase in PE funding in the sector

Insurance reforms may see PE funding surge in sector


MUMBAI:The proposal by insurance regulator Irdai to let private equity (PE) funds promote insurance companies will bring a lot of money into the industry.Irdai announced a wide range of reforms on Friday, including opening the door to private equity funds and lowering the capital requirement for some social insurance schemes' insurers.

Insurance companies from developed markets were major investors in the sectors during liberalization, but private equity funds are the ones with a lot of money now.Insurance companies could not be promoted by PE funds at this time, and there was also a 10% cap on a single investor.The Irdai said on Friday that PE promoters could now invest directly by choosing the special purpose vehicle (SPV) route.Additionally, investors are no longer considered promoters and can now acquire up to 25% of the paid-up capital.

Nithya Easwaran, MD, Multiples Alternate Asset Management, stated, "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.""She added that the "fit and proper" criteria will guarantee that high-quality, responsible, and experienced institutional investors will become significant stakeholders and work alongside the businesses during the transition to a more open architecture and innovative industry structure.

"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," stated Ishaan Mittal, MD of Sequoia Capital.

Kamesh Goyal, chairman of Digit Insurance, stated, "The amendments will make the sector a hotbed for investments and make it more investor-friendly in the coming years."Goyal and Prem Watsa's Fairfax Group promote Digit Insurance.

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