Life insurers with 10 years of operations can go public: IRDA

The much-awaited norms for public issues of life insurance companies have been notified in the Gazette by the Insurance Regulatory and Development Authority.

As per the norms, only those companies which completed 10 years of operations can apply for permission to go for public issues.

Before filing the Draft Red herring Prospectus with the Securities Exchange Board of India, insurers will have to obtain permission from insurance regulator.

This approval would be valid only for a period of one year.

Many parameters such as the period for which the insurer has been in the business, the history of compliance with regulatory requirements, maintenance of required solvency margins for the preceding six quarters from the date of application would be considered by the IRDA while granting permission.

FINANCIAL ASPECTS

Key financial aspects, such as the extent to which the promoters could dilute their respective shareholdings, the maximum subscription to be allotted to foreign investors and lock-in period for the promoters would also be prescribed by the Authority.

For valuations, embedded-value method as calculated by an independent actuary has to be mentioned. Embedded value is the minimum valuation of the company taking into account the present business without adding the capacity to generate new business.

The offer document should clearly mention various risks for investors, including credit, liquidity and operational risks.

The norms will be applicable to issue of capital, and divestment of equity by one or more of the promoters through a public offer, IRDA said.

At present, there are 24 life insurance companies approved by the IRDA, of these, four/five would have completed 10 years of operations. (PTI)