The bill, if passed, would bring insurers on a par with other state-backed institutions, such as the National Bank for Financing Infrastructure and Development (NaBFID) or infrastructure sponsors such as NTPC, which increasingly route projects through special purpose vehicles (SPVs) to limit balance sheet risks and enhance execution focus.
The proposed bill seeks to remove the long-standing legal bar that prohibited insurers from investing in private limited or unlisted companies. Once allowed, the move would unlock a new pool of long-term capital for infrastructure and entrepreneurial ventures.
Agenciesbigger cover Proposed bill would bring insurers on a par with other state-backed institutions
The bill seeks to delete Section 27A of the Insurance Act, 1938, which explicitly prohibited insurers from investing in shares and debentures of private limited companies. With this provision omitted and multiple investment-related sections consolidated into a revised Section 27, the onus would shift to the Insurance Regulatory and Development Authority of India (Irdai) to frame safeguards, build exposure limits, and set eligibility norms to protect policyholders’ interests, said experts.
“Private limited companies are where most new entrepreneurial and infrastructure capital is being deployed today,” said a senior industry official. “SPVs promoted by large, established groups are often very safe investments, but insurers were legally barred from taking equity directly.”
Until now, insurers were permitted to invest in approved and other investments-including equity shares, debentures, bonds and infrastructure instruments-subject to conditions on credit rating, track record and prudential exposure. However, Section 27A(3) barred any investment in private limited companies, even though insurers could take indirect exposure through alternative investment funds (AIFs).
This restriction increasingly clashed with the way the infrastructure and project-financing ecosystems have evolved. SPVs Ring-fence Assets
Many large projects, whether in power, roads, renewables or logistics, are now executed through SPVs structured as private limited companies. NTPC, for instance, routinely sets up project-specific SPVs, while institutions such as NaBFID support these structures through credit enhancement and long-term financing mechanisms.
Private limited companies, under the Companies Act, restrict share transfers, cap shareholders at 200 and cannot raise money through public invitations. This is distinct from privately placed bonds, which insurers have long invested in. The prohibition applied specifically to equity investments in private limited companies.
Industry participants say the amendment does not change insurers’ ability to invest through AIFs where exposure caps already exist. What changes is the option to invest directly, including through co-investments alongside private equity or infrastructure funds.