IRDAI proposes conditions for private equity funds in insurance companies

An exposure draft released by IRDAI has proposed to allow private equity (PE) funds to come in as promoters of insurance and reinsurance companies, with certain conditions, including that the PE funds have to complete 10 years of operation and funds raised by them, including their group entities, must amount to $500 million or more.

IRDAI has also proposed to amend the existing regulations to provide “fit and proper criteria” for applicants desiring to carry on insurance business, limits of investment to be made in insurance companies, lock-in period on investment and simplify the process of insurers’ registration.

According to the exposure draft, private equity funds may invest in the applicants in the capacity of promoter or investor. A private equity fund may invest in any insurer in the capacity of “promoter”, only if it has completed 10 years of operation, funds raised by the PE fund including its group entity or entities is $500 million or more, investible funds available with the PE fund are not less than $100 million and it has invested in the financial sector in India or the other jurisdictions.

As per the proposed amendment to the existing rules, a registration application to carry on an insurance business shall not be eligible to apply for the requisition, where the requisition for registration application has been rejected by the IRDAI or withdrawn by the applicants at any time during five financial years preceding the date of application, certificate of registration has been cancelled by the authority, or the investors or promoter of the existing venture have exited for any reason at any time during the preceding two financial years, from the date of requisition for registration application.