LIC's Private Equity Push Raises Policyholder Safety Fears

Life Insurance Corporation of India has tilted its investment portfolio decisively away from loans toward private unlisted equity, a shift that a letter to the editor of The Hindu Businessline on August 5 called a "cause for concern." The letter, signed by a reader, argued that the insurer's "total skipping of loans" and "evident embracing of private unlisted equity" threatens the liquidity and security that policyholders rely on.

LIC, India's largest life insurer, manages assets worth roughly ₹50 lakh crore. Its allocation to loans has dropped sharply in recent years. The company now invests a growing portion of its surplus in unlisted equity, a class that offers higher potential returns but carries greater risk and lower liquidity. The letter writer said "reasonable growth with adequate liquidity, utmost safety and security of hard earned money" are what customers expect, and that "unbridled courting of private/unlisted equity is no prescription for any of the above."

For LIC shareholders, the risk is twofold. A sudden spike in redemptions or a downturn in the unlisted holdings could force the insurer to sell assets at distressed prices. LIC's long-duration liabilities – life policies that pay out decades into the future – require steady, predictable returns. Illiquid assets such as private equity do not match that profile well, several insurance analysts have said in the past.

The shift also exposes LIC to valuation uncertainty. Unlisted equity is marked to model, not to market. That leaves room for optimistic assumptions that may not hold when the assets are eventually sold. The letter writer did not name specific holdings, but LIC's annual reports show stakes in infrastructure, renewable energy, and financial technology ventures.