Insurers set to park funds in VC firms

NEW DELHI: Insurance majors such as ICICI Prudential, Max New York Life, HDFC Life and Reliance Life Insurance are chalking out plans to park their surplus funds with venture capital (VC) firms. About Rs 10,000-crore is expected to be invested by insurance companies in VC firms in the next six-eight months. The move follows the change in investment norms by the Insurance Regulatory and Development Authority (IRDA) recently. Till now insurance companies were investing in government securities, corporate bonds and equity markets.

���We���ve invested in some VC funds earlier. Investments by an insurance company into a VC fund makes complete sense because it���s a long-term investment. This will help the insurance firms to diversify their portfolio,��� ICICI Prudential Life chief investment officer Puneet Nanda said.

The relaxation in norms may also lead to the formulation of more VC firms. ���We will see more domestic VC funds formed, or some of the existing funds increasing their corpus, based on the availability of these insurance funds,��� Nexus India Capital chief executive officer Sandeep Singhal said.




Earlier, there was no clarity on whether insurers can take an exposure through VC funds. Now, companies including Max New York Life, Metlife India and Reliance Life Insurance have said they would take a decision in this regard shortly. ���In our next investment meeting we���ll seek the opinion of our board. Any such investment in a VC fund will take at least six to seven months,��� Max New York Life���s investment head Prashant Sharma said. Metlife India managing director Rajesh Relan and Reliance Life Insurance CEO P Nandgopal also said they will discuss the same in their next board meetings.

IRDA recently allowed insurance firms to invest 3% of their total investible corpus or 10% of the fund���s size, whichever is lower, into VC funds. According to analysts, in the next six months around Rs 10,000-crore is expected to land in the accounts of various VC firms. ���Insurance companies will have to chalk out a strategy on which kind of funds or themes they can get more value from. We expect that in the coming six months we���ll see more activity in this space,��� said IDG ventures India MD Manik Arora.