On 5 December 2017, the Insurance Regulatory and Development Authority of India (IRDAI) published a set of guidelines to regulate private equity investment in insurance companies - the IRDAI (Investment by Private Equity Funds in Indian Insurance Companies) Guidelines 2017 (Guidelines). These Guidelines have come into effect from 5 December 2017, and apply to all unlisted Indian insurance companies and to Private Equity Funds (as defined in the Guidelines), which have invested in insurance companies.


The Guidelines apply to investments by Private Equity Funds (PE Funds) in unlisted Indian insurance companies (and to the unlisted Indian insurance companies themselves), and not to investments in listed Indian insurance companies.

Comment: It seems likely that the regulatory intent was to regulate all private equity investments in this sector in a uniform manner, so it would be safer to assume that a PE Fund will need to comply with the requirements in these Guidelines in respect of pre‑existing insurance investments, unless the IRDAI indicates otherwise. PE Funds may also wish to discuss with the IRDAI as to whether, in relation to existing investments, they will be required to retrospectively provide the declarations, undertakings or certifications contemplated in the Guidelines.

Definition of ‘Private Equity Fund’

Under the Guidelines, a PE Fund is defined in an inclusive and not an exclusive manner. The definition includes: (i) an alternative investment fund registered with the Securities and Exchange Board of India (SEBI) under the SEBI (Alternative Investment Fund) Regulations 2012; and/or (ii) a fund specifically formed for investment in one or more entities by one or more persons.

Comment: One immediate question that arises is whether funds that are incorporated outside India and not registered in India will qualify as PE Funds? Also, where does this leave other alternative asset managers, sovereign wealth funds and pension funds? As the definition is inclusive and because it is likely that the IRDAI intended to put in place a common set of guidelines, until there is further regulatory on this, , it would be advisable to treat such broader set of entities, regardless of whether the investment vehicle is incorporated or registered in India, as being covered.

‘Investor’ v/s ‘Promoter’

A PE Fund is permitted to invest in Indian insurance companies either as a “promoter”, where its investment exceeds 10% of the equity capital of the insurer, or as an “investor”, where its investment is less than or equal to 10%.[1]   A summary of the main conditions that apply in each case are set out below.


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The insurance market in India is growing and remains under-penetrated. That combined with the recent listings of a number of insurers has made the insurance sector an attractive one for private equity investors. The Guidelines provide clarity in that they set out an over-arching regulatory framework that will now apply. However, there remain a number of open ended questions on which further clarity is needed.

Although the Chairman of the IRDAI is permitted to clarify matters, it may be that further changes are made to these Guidelines as the IRDAI’s practice evolves and as various market participants engage with the IRDAI on the issues highlighted in this alert memorandum, so private equity investors will need to “watch this space”.

In the meanwhile, private equity investors should evaluate their current insurance holdings and also re-visit and future investment plans and consider how these may be affected by the Guidelines.