New Delhi:

India’s insurance regulator has proposed to the government that insurers be allowed to buy over 10% of unlisted firms without approval, regulatory and industry sources said, a move that could unlock new funding avenues for startups in Asia’s third largest economy.

Currently, Insurance Regulatory and Development Authority of India (IRDAI) does not allow insurers to invest in unlisted entities without its permission.

IRDAI has sent a proposal to the government to allow buying a more than 10% stake in unlisted firms by insurers, using over 10% of the monies lying in their shareholders fund, policyholders fund, or funds maintained by a reinsurance company, according to the two sources, who requested anonymity.

“The finance ministry is considering IRDAI’s suggestion, and is looking to make the changes in the law,” one source said.

Such a move would potentially unlock billions of dollars for investment in unlisted firms, particularly those startups that use technology to bring more people under the insurance net in a country that is among one of the most under-insured in the world.

Easier access to funds would help lift the mood in a startup sector that has been hit by the global tech market rout.

The change is an attempt to bring Indian laws in sync with countries such as South Korea, where insurance firms can own fintech subsidiaries and credit information businesses, and Canada, which permits insurance players to own bank holding companies.

The finance ministry and IRDAI did not respond to emails requesting comments.

The proposal by IRDAI is based on the recommendation of a working group, which included IRDAI officials and heads of insurance companies.

The change would also allow non-life insurers, that provide health and general insurance policies, to offer add-on incentives presently offered by global peers such as rewards programs, exclusive lounge access facilities, free entertainment and music.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)