A private equity fund may invest in any insurer in the capacity of “promoter” if it has been in operation for 10 years and the funds raised by the PE fund, including its affiliates, are US$500 million or more (or its equivalent). in rupee, IRDAI said. “The investable funds available with the PE fund should not be less than US$100 million,” said the regulator in its Draft Registration of Indian Insurance Companies (Regulations) 2022.

Investing from PE funds is expected to attract more foreign investment to the country. In 2020, the government had raised the limit for foreign direct investment in insurance companies under the automatic route from 49 percent to 74 percent. IRDAI had in principle approved PE funds to invest in insurers in 2017. While private investment in insurance is big business in the US and Europe, it has yet to gain momentum in India. In 2021, retail investors announced more than $200 billion in deals to acquire or reinsure US liabilities.

IRDAI said equity contribution from promoters and other investors will have a five-year lock-up period at the time final approval is granted or even before. The investment freeze after five years but before 10 years is three years or 12 years from the date registration is granted, whichever comes first, and after 10 years, the investment freeze is two years or 11 years from the final registration grant, said the regulator.

According to the IRDAI draft, direct or indirect participation as an investor in an Indian insurer should be less than 25 percent of the insurer’s paid-up equity. Investments in investor capacity should be limited to no more than two life, two non-life, two health and two reinsurers, it said.

The regulator has proposed that the minimum promoter participation should be kept at over 50 per cent of the insurer’s paid-up equity. Promoters may dilute their interest in the insurer to below 50 per cent but not less than 26 per cent of paid-up equity if the insurer has had a solvency ratio above the control level for the 5 years immediately prior to the dilution of the promoter’s interest which are shares in the insurer listed.

In an Indian insurer with foreign investments, the majority of its directors, key management personnel and at least one of the chairman of the board, its managing director and its chief executive officer should be resident Indian citizens, it said.

Furthermore, in an Indian insurer with more than 49 per cent foreign investment, not less than 50 per cent of its directors should be independent directors. If the chair of its board is an independent director, at least a third of its board should be made up of independent directors, the regulator said.

In addition, for a financial year for which dividends on shares are paid and for which the solvency margin is at any time less than 1.2 times the solvency control level, no less than 50 per cent of the net profit for the financial year should be retained in general Restraint, said IRDAI.

Previously, in 2016, IRDAI had proposed that the board must consist of at least three “independent directors”. However, this requirement is relaxed to “two” independent directors for the first five years from the issuance of the insurer’s certificate of registration. “This rule will be tightened in the new scheme of things,” an official said.