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IRDA permits insurers to invest in private equity, debt funds

​India, Aug, 23, 2013

As per a circular given out by insurance regulator IRDA on Aug 23, 2013, now insurance companies can invest in private equity and debt funds.

Relaxing norms, the Insurance Regulatory and Development Authority in its circular said, “insurers are permitted to invest in Category I & II AIFs (Alternative Investment Funds) under the extant SEBI regulations.”
In India, AIFs refers to pooling of fund either from Indian or international resources, which will be used to invest as per a pre-decided policy. They are private funds which are out of the authority of any regulatory agency in India.

Further speaking on the matter, IRDA said, “the permitted Funds in Category I are Infrastructure Fund, SME Fund, Venture Capital Fund and Social Venture Fund as defined in Alternate Fund Regulations. Whereas, in Category II, at least 51% of the funds of such AIF shall be invested in either of the Infrastructure entities or SME entities or Venture Capital undertakings or Social Venture entities.”

The regulator’s circular also notified that the restrictions regarding investment of funds outside India, promoter group, combined exposure limits in venture capital funds and AIFs under the Other than Approved category of investments will continue to apply. “Insurers are also not permitted to invest in AIFs, which has the nature of Funds of Funds and Leverage Funds,” it added.

Investment in the AIFs along with the existing investments in Venture Funds shall be subject to the following revised exposure limits:

Type of Insurer

Overall Exposure to Venture Funds and AIFs put together

Exposure to single AIF/Venture Fund

(a)

(b)

(c)

Life Insurance Company

3% of respective Fund

10% of AIF` /Venture Fund size or 20% of Overall Exposure as per (b), whichever is lower.

 

The above ‘10%’Limit shall be read as ‘20%’ in case of Infrastructure Fund

General Insurance Company

5% of Investment Assets

10% of AIF` /Venture Fund size or 20% of Overall Exposure as per (b), whichever is lower.

 

The above ‘10%’ Limit shall be read as ‘20%’ in case of Infrastructure Fund


The complete IRDA Circular:http://www.irda.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo2047&flag=1