LeapFrog Investments, the world’s first microinsurance fund, is planning to invest up to $30 million (Rs 138 crore) in India from its recently closed fund. The firm has raised over $110 million (Rs 506 crore) to invest in businesses that deliver affordable insurance across Asia and Africa. India is one of the priority countries for LeapFrog, it said in a statement.
Microinsurance, the provision of insurance to the financially excluded, is emerging as a big untapped market. Currently only five million people – or only 2% of the poor, have microinsurance. And to tap this opportunity, there are 24 microinsurance plans registered with the Insurance Regulatory and Development Authority (IRDA) by 15 commercial life insurers in India.
Indian microfinance institutions, which have built up large distribution networks and are now looking to diversify their revenue streams and leverage their network, are turning to micro insurance. SKS Microfinance, country’s largest MFI who has filed for a listing, said that it has distributed 2.3 million life insurance policies till September 2009. SKS has a distributor relationship with Bajaj Allianz Life Insurance, which also has an equity stake in the MFI.
The fund would look at making investments of between $5 million and $15 million. LeapFrog said, it would look at investing in innovative insurance and financial services companies or businesses that own strong distribution platform. These distribution partners could include banks, retail stores, mobile phone networks, microfinance institutions, religious institutions, or any company with a broad network.
“India is, in absolute terms, the largest and fastest growing microinsurance market in the world. Yet, the potential market for insurance here is still underserved, with most people unable to access insurance via conventional channels,” said Jim Roth, the LeapFrog Principal who leads the fund’s investments in South Asia.
In addition to India, LeapFrog’s priority countries for investment include the Philippines, South Africa, Kenya and Ghana. The fund has already made its first investment of over $6 million in AllLife, a South African insurer serving people living with HIV and diabetes.
The funds biggest limited partner is KfW Entwicklungsbank and BMZ, the German Federal Ministry for Economic Cooperation and Development, which put in $25 million. Other investors are International Finance Corporation with $20 million, Soros Economic Development Fund with $7 million and global reinsurer Flagstone Reinsurance with $12 million commitment.