Industry Odisha Bureau, Oct 22: Life and general insurers are turning to private credit to diversify and seek regular income. The industry wants the 3% shareholders’ fund cap on specified AIFs raised to 5%.
Indian insurers have nearly doubled their exposure to private credit funds over two years. They are seeking wider diversification and better returns for policyholders, The Economic Times reported. Both life and general insurers are taking part in the shift.
Private credit refers to loans made to businesses outside public debt markets. Such lending is often pooled through alternative investment funds, or AIFs.
Bajaj Life and Bajaj General Insurance offer a sharper example. Their combined AIF commitments rose to ₹650 crore from ₹200 crore in two years. Commitments are now 3.25 times their earlier level, a rise of ₹450 crore.
Most of the extra allocation went to private credit rather than equity strategies. These figures are commitments, which funds draw down over time, not capital already deployed.
Amit Joshi, chief investment officer at Bajaj General Insurance, said insurers want broader portfolios. AIFs have emerged as one available route, he noted. For general insurers, he added, credit AIFs may offer relatively predictable returns.
Credit AIFs can also provide regular income distributions, in his view. He stressed that allocations depend on each insurer’s goals, risk appetite and regulations. Such returns are not guaranteed and depend on borrowers repaying on time.
The investment chief of a large life insurer said it had doubled AIF exposure. The executive, who was not named, gave no further details. SBI Life Insurance has also raised its investments in the segment.
Insurers have backed funds run by Acertis, ICICI Prudential AIF and other private credit platforms. Acertis Credit Group’s fourth private credit fund has drawn over $700 million in commitments. It is aiming for $1 billion.
Kanchan Jain, who heads the group, linked the interest to a wider institutional search. Investors, she said, want income-generating assets beyond traditional fixed-income products. Performing private credit, in her view, offers a diversified pool of borrowers. She also cited regular distributions and loan structures tailored to individual businesses.
The asset class also carries risks, including defaults, illiquidity and valuation uncertainty. Insurers must match such holdings with the timing of their policyholder obligations.
Currently, insurers may invest up to 3% of shareholders’ funds in specified AIFs. The industry wants that limit raised to 5%, citing greater flexibility. No change to that cap has been reported.
Separately, the Insurance Regulatory and Development Authority of India (IRDAI) widened options earlier this year. Insurers may now buy equity and debt of private limited companies. IRDAI also eased norms for financing infrastructure through special purpose vehicles.
Life insurers can now invest up to 3% of life or segregated funds. General insurers can invest up to 5% of their investment assets. These caps cover private limited companies, AIFs and venture funds combined. They use different bases from the shareholders’ fund limit on specified AIFs.
IRDAI has clarified that single-AIF limits include direct stakes and fund-of-funds exposure. Overseas deployment of capital drawn from policyholders is also restricted. Insurers are gaining room to lend privately, but within firm prudential limits.
