Friday, January 19, 2018

PE funds will be allowed as promoters of Indian insurers

A proposal that allows private equity funds to promote insurance companies through special purpose vehicles with a lock-in period of five years has been approved by India’s insurance regulator.

The Insurance Regulatory and Development Authority of India (Irdai) moved to approve the proposal to allow PE funds to serve as promoters in insurance companies, as long as management-owned and control regulations provided for under the Insurance Amendment Act 2015 are met.

A senior Irdai official explained that these PE firms need to provide for future capital as required.

In India, as in other parts of the world, insurers need capital investment in the first few years before they break even.

In the case of general insurance companies, they break even in a matter of five-to-seven years, while life insurance companies can take 10-12 years to recoup their investment.

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