IRDAI debating feasibility of PE investments in insurance companies

Insurance Regulatory and Development Authority of India (IRDAI) is looking into the area of private equity firms investing in insurance companies.

IRDAI chairman TS Vijayan said that this is a topic under discussion and that the regulator may arrive at a decision in a month or so.

“There are two categories, one where there is an investor in an insurance company holding less than 10 percent stake and the other is a promoter. We are looking at these investments and their feasibility and we will come to a decision in a month or so,” he said on the sidelines of an Assocham Insurance Summit.

There are several PE firms invested in insurance companies and concerns have been raised about their investments since some of them are short-term in nature and exits are also being planned.

The regulator is also looking at introducing risk-based solvency in the insurance industry. Vijayan said that a committee to look into this has been formed and added that it will take time for risk-based capital to evolve.

After a long lull, several insurance companies have linked up initial public offers to list on exchanges. Vijayan said that it will be good if all players come to the market, but added that nobody can be forced to do so.

Among the IPO candidates are state-owned general insurers too. Vijayan said that they have given some time to PSU insurers to shore up capital to 150 percent.

In terms of new insurers entering the market, Acko and Fairfax-backed Digit Insurance has received a license to operate in the general insurance space. Vijayan said that a few other players have expressed interest to enter the general insurance and standalone health insurance segments.

There have also been reports about mergers among public sector banks,  some of which are promoters of these insurance companies. While acknowledging that IRDAI has not received any communication as yet on this front, Vijayan said that if parents of insurers get merged, it maybe a challenge and they may have to look at it.

As per IRDAI norms, one firm cannot promote more than one insurance company in the life and general insurance category.

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