Irdai suggests enabling insurers to invest in unlisted businesses.
- ByStartupStory | November 14, 2022
According to regulatory and industry sources, India’s insurance regulator has proposed to the government that it allow insurers to buy over 10% of unlisted companies without permission. This move could open up new funding options for startups in Asia’s third-largest economy. The Insurance Regulatory and Development Authority of India (IRDAI) policy currently prohibits insurers from investing in unlisted firms without authorization.
According to the two sources, who asked to remain anonymous, IRDAI has sent a proposal to the government that would permit insurers to purchase more than a 10% stake in unlisted companies using more than a 10% portion of the funds in their shareholder funds, policyholder funds, or funds managed by a reinsurance company.
“The finance ministry is considering IRDAI’s suggestion and is looking to make the changes in the law,” one source stated.
A move like this could make billions of dollars available for investments in unlisted businesses, especially startups using technology to expand insurance coverage in one of the least insured nations in the world.
A startup industry that has been adversely affected by the global IT market downturn could benefit from easier access to funding.
The amendment aims to align Indian law with that of nations like South Korea, where insurance companies are allowed to own fintech subsidiaries and credit information companies, and Canada, where insurance companies are allowed to control bank holding companies. Emails asking for opinions received no response from the finance ministry or IRDAI. IRDAI officials and the heads of insurance companies participated in a working group, and their recommendations served as the foundation for the organization’s proposal.
The modification would also enable non-life insurance companies that offer health and general insurance policies to provide supplemental benefits already provided by their international competitors, such as rewards programs, exclusive lounge access, free entertainment, and music.
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