Venture Capital

Irdai tweaks AIF rules for insurance cos

Read more at timesofindia.indiatimes.com

Chennai: Insurance companies have been allowed by their regulator to invest in ‘fund of funds’ provided such funds are not utilized by an Alternate Investment Fund to invest outside India. The new dispensation gives insurers a source to diversify their investment into new avenues like startups and also gives asset managers a new source of capital.
The Insurance Regulatory and Development Authority of India (Irdai) has also barred investment into AIFs which undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted under SEBI regulations. Insurers can invest only into those Fund of Funds (FoF) that comply with the requirement of Section 278 of the Insurance Act, 1938. The insurer cannot invest in an AIF, which in turn has exposure to an FoF, in which the insurer has taken an exposure.
Insurers have to disclose these investments every quarter. These new guidelines are triggered under category 2 AIF of SEBI (Alternative Investment Funds) Regulations, 2012. AIFs which do not fall in Category I and III and which do not undertake leverage or borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI norms. Real estate funds, private equity funds (PE funds), funds for distressed assets, etc. are the various types of funds registered as Category II AIFs.
On the other hand, the Indian fund managers laud this move as it allows the creation of a strong fund of funds ecosystem in the country. It will allow them to raise money from India fund of funds and Indian institutional capital than foreign capital. And help accelerate the quantum of rupee capital going into Indian startups.
This is a huge win for insurance companies as they can use this route to indirectly invests in startups, says Siddharth Pai, founding partner and CFO at 3one4 Capital and co-chair at regulatory affairs committee, Indian Venture Capital Association.

Read more at timesofindia.indiatimes.com

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