One year after the Insurance Regulatory and Development Authority’s (Irda) allowed insurance companies to invest in venture capital (VC) funds, no insurer has shown interest in funding VCs.
In August last year, Irda had allowed life insurers to invest 3 per cent of their total investible corpus in VC funds or 10 per cent of the fund’s size, whichever is lower. For general insurers, the limit is 5 per cent of investment assets or 10 per cent of the fund size, whichever is lower.
Insurers said investments in venture capital funds were long term while their 90 per cent premium was collected under unit-linked plans (Ulips). “Venture capital is not exactly a matter class we are looking at. There are other avenues like project finance, corporate bonds and equity. We have invested less than 0.5 per cent of the investible corpus, Rs 1,65,000 crore. Irda’s guideline is not a constraint for us,” said Life Insurance Corporation of India (LIC) Executive Director, Investments, N Mohan Raj.
“Insurance companies will take some time to understand and invest in any new avenue. Also, the investment climate is too volatile to take a decision. We are looking at some good proposals,” said Bajaj Allianz Life Insurance Chief Kamesh Goyal.
“There are not many long-term domestic institutional investors in India. Due to the slowdown in economy, some of the funds have not attracted insurance companies,” said a senior executive at UTI Ventures.
“Private equity as an asset class should be a much more desirable place for insurance companies to invest considering the volatility in public equity markets. This would be a perfect match for life insurance companies, who have long-term liabilities. Overseas insurance companies and pension funds are traditional investors in private equity and venture capitals,” said Axis PE Managing Director and Chief Executive Alok Gupta.
Based on life insurers’ assets under management of Rs 700,000 crore, potentially over Rs 21,000 crore could have flowed from this segment alone.