Key Takeaways
- • Indian insurers have nearly doubled their exposure to private credit funds over the past two years, according to The Economic Times, as they seek diversification and better returns for policyholders.
- • Bajaj Life and Bajaj General Insurance increased commitments to alternative investment funds (AIFs) to Rs 650 crore from Rs 200 crore over two years, with most of the additional allocation going to private credit rather than equity strategies.
- • Under the current framework, insurers can invest up to 3% of shareholders' funds in specified AIFs; the industry is lobbying for a 5% cap.
- • Acertis's fourth private credit fund has crossed $700 million in commitments and is targeting $1 billion, per Kanchan Jain of Acertis Credit Group.
- • Recent IRDAI revisions widened insurers' investment options, with life insurers allowed up to 3% and general insurers up to 5% of investment assets across private limited companies, AIFs and venture funds combined.
Summary
Indian insurance companies have nearly doubled their exposure to private credit funds over the past two years, according to The Economic Times, as they look to diversify portfolios and improve returns for policyholders. Bajaj Life and Bajaj General Insurance, for example, raised their commitments to alternative investment funds to Rs 650 crore from Rs 200 crore over that period, with the bulk of the incremental allocation directed to private credit rather than equity strategies. Another chief investment officer at a large life insurer said it had doubled its AIF exposure without disclosing figures.
Amit Joshi, chief investment officer of Bajaj General Insurance, said AIFs offer general insurers the potential for relatively predictable returns and regular income distributions, with allocations guided by each insurer's investment objectives, risk appetite and regulatory requirements. Insurers have backed funds managed by Acertis, ICICI Prudential AIF and other private credit platforms, and SBI Life Insurance has also stepped up its investments in the segment.
Kanchan Jain, head of Acertis Credit Group, said demand reflects institutional investors' search for income-generating assets beyond traditional fixed income. Acertis's fourth private credit fund has crossed $700 million in commitments and is targeting $1 billion. Jain said private credit gives insurers exposure to a diversified borrower pool, with regular distributions and financing structures tailored to individual businesses.
The regulatory backdrop has shifted. Earlier this year the Insurance Regulatory and Development Authority of India (IRDAI) widened insurers' investment options, including permitting investments in equity and debt of private limited companies and easing norms for infrastructure financing through special purpose vehicles. Under the current framework, insurers may invest up to 3% of shareholders' funds in specified AIFs, and the industry is seeking to raise this to 5%. The revised framework allows life insurers up to 3% of life or segregated funds, and general insurers up to 5% of investment assets, in private limited companies, AIFs and venture funds combined. IRDAI has clarified that single-AIF exposure limits will aggregate direct and indirect exposure through fund-of-funds structures, and it restricts overseas deployment of policyholder-sourced capital.
Amit Joshi, chief investment officer of Bajaj General Insurance, said AIFs offer general insurers the potential for relatively predictable returns and regular income distributions, with allocations guided by each insurer's investment objectives, risk appetite and regulatory requirements. Insurers have backed funds managed by Acertis, ICICI Prudential AIF and other private credit platforms, and SBI Life Insurance has also stepped up its investments in the segment.
Kanchan Jain, head of Acertis Credit Group, said demand reflects institutional investors' search for income-generating assets beyond traditional fixed income. Acertis's fourth private credit fund has crossed $700 million in commitments and is targeting $1 billion. Jain said private credit gives insurers exposure to a diversified borrower pool, with regular distributions and financing structures tailored to individual businesses.
The regulatory backdrop has shifted. Earlier this year the Insurance Regulatory and Development Authority of India (IRDAI) widened insurers' investment options, including permitting investments in equity and debt of private limited companies and easing norms for infrastructure financing through special purpose vehicles. Under the current framework, insurers may invest up to 3% of shareholders' funds in specified AIFs, and the industry is seeking to raise this to 5%. The revised framework allows life insurers up to 3% of life or segregated funds, and general insurers up to 5% of investment assets, in private limited companies, AIFs and venture funds combined. IRDAI has clarified that single-AIF exposure limits will aggregate direct and indirect exposure through fund-of-funds structures, and it restricts overseas deployment of policyholder-sourced capital.
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