Indian regulator proposes allowing insurers to invest in unlisted companies

By Nikunj Ohri

NEW DELHI (Reuters) – India’s insurance regulator has proposed to the government that insurers be allowed to buy more than 10% of unlisted companies without approval, regulatory and industry sources said, a move that could open new avenues for funding for startups in Asia’s third largest economy.

Currently, the Insurance Regulatory and Development Authority of India (IRDAI) does not allow insurers to invest in unlisted entities without its permission.

IRDAI has sent a proposal to the government to authorize the purchase of more than 10% stake in unlisted companies by insurers, using more than 10% of the funds in their shareholders’ fund, fund policyholders or funds managed by a reinsurance company, according to the two sources, who requested anonymity.

“The Ministry of Finance is considering IRDAI’s suggestion and is looking to make changes to the law,” a source said.

Such a move would potentially unlock billions of dollars for investment in unlisted companies, especially startups that are using technology to bring more people under the insurance net in a country that is one of the most underinsured. in the world.

Easier access to funds would help boost morale in a startup sector that has been hit by the rout in the global tech market.

The change is an attempt to synchronize Indian laws with countries such as South Korea, where insurance companies can own fintech subsidiaries and credit reporting firms, and Canada, which allows insurance players to own bank holding companies.

The Ministry of Finance and IRDAI did not respond to emails seeking comment.

IRDAI’s proposal is based on the recommendation of a working group, which included IRDAI officials and heads of insurance companies.

The change would also allow non-life insurers, who provide health and general insurance policies, to offer additional incentives currently offered by their global peers, such as rewards programs, exclusive lounge access facilities, free entertainment and music.

($1 = 81.9000 Indian rupees)

(Reporting by Nikunj Ohri; Editing by Simon Cameron-Moore)

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