Insurers can now invest in private equity, debt funds: IRDA

NEW DELHI: Relaxing norms, regulator IRDA today allowed insurance companies to invest in private equity and debt funds.

"Insurers are permitted to invest in Category I & II AIFs (Alternative Investment Funds) under the extant SEBI regulations," the Insurance Regulatory and Development Authority said in a circular.

In March, life and general insurance companies were allowed to invest in Category I AIFs, comprising infrastructure funds, SME funds, venture capital funds and social venture funds. Category II AIFs comprise private equity funds and debt funds.

AIFs are funds established or incorporated in India for the purpose of pooling in capital from India and overseas to be invested as per a pre-decided policy.

Category I AIFs are those with positive spillover effects on the economy, for which certain incentives or concessions might be considered by SEBI, the government or other regulators. For Category II AIFs, there are no specific incentives or concessions.

IRDA said in Category II, at least 51 per cent of the funds of such AIFs should be invested in infrastructure entities, SME entities, venture capital undertakings or social venture entities.

Insurers, however, are not permitted to invest in AIFs that have the nature of funds of funds and leverage funds, it added.

The regulator said the overall exposure to venture funds and AIFs put together should not exceed 3 per cent of the respective fund in the case of a life insurance company and 5 per cent in the case of a general insurance company.

Exposure to a single AIF or venture fund should not be more than 10 per cent of the fund size.

The investment norms were relaxed after representations from stakeholders, including large insurance companies. IRDA said the matter was referred to an expert committee on investment, which was of the view that insurance companies should be allowed to invest in Category II AIFs.