As much as $ 40 million could be deployed to India by LeapFrog Investments, a $ 135 million fund focused on micro-insurance.
Jim Roth, co-founder and partner of LeapFrog Investments, stated that "India presents an opportunity as the level of penetration of insurance is very low."
Micro-insurance products are designed to provide insurance coverage at low rates to the poor and businesses that are not covered by traditional insurance plans. In other areas of the world, only the wealthiest of residents are afforded the luxury of insurance coverage. In India, however, micro-insurance focuses on mass markets, and LeapFrog will be making an investment in an undisclosed company in an amount between $ 5 million and $ 20 million.
LeapFrog Investments, based in Washington, has received commitments from people like Pierre Omidyar and George Soros and financial institutions such as Germany's KfW Entwicklunsbank and Netherlands-based FMO.
Mr. Roth stated that "The aim was to set up a fund that would tap private capital and would have a social impact".
According to the Insurance Regulatory and Development Authority of India, between the year 2000, when the insurance market opened up to private firms, and the year 2009, the insurance penetration rate rose to 5.2% from 2.3%.
"We are also looking for opportunities where LeapFrog could invest in micro-insurance products being designed by larger companies."
Mr. Ray said that many insurance firms are considering the establishment of their own micro-insurance companies since the microfinance industry has been so successful in India.
Head of financial services at KPMG India Pvt. Ltd., Abizer Diwanji, explained that the micro-insurance market and the microfinance business will be integrated. "The MFI business can cross-sell these products," he said.
The introduction of such a business model in this region of the world will provide a broad client base, which is essential to the success of such a venture.
LeapFrogs other investments include $ 14 million in Kenyan micro-insurance company Apollo Investment and $ 7 million investment in South African AllLife, which provides life insurance coverage to people with AIDS.
Weather index insurance coverage provided to individuals for protection against weather related conditions and crop damages is an area that Mr. Roth and LeapFrog find appealing and would like to invest in companies that sell such insurance products and the operation in Gujarat. Mr. Roth did not discriminate the name of the company.