India allows PE funds to own insurance companies

December 7 2017 by InsuranceAsia News Staff

The Insurance Regulatory and Development Authority of India (Irdai) has issued guidelines allowing private equity funds to own up to 10% of the paid-up equity of an insurance company in the country.

Irdai announced the policy change in a circular published on December 5, stating that PE funds may become promoters of insurance companies by investing through special purpose vehicles with a lock-in period of five years.

The guidelines further state that Indian investors, including PE funds, jointly should not hold more than 25% of paid-up equity share capital of an insurance company.

After the lock-in period of five years, an undertaking of the divestment plan, preferably through an IPO, should be submitted to the regulator.

The guidelines, according to insurance professionals, will enable incremental flow of FDI into the country and will unleash a new era for formation of new-age insurers, leading to the further growth of the industry.

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