Thursday, June 23, 2011

Irda Issues Draft Norms for Insurers IPO

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The current value of future profits of a life-insurance company needs to be at least twice its paid-up equity capital,if it wants to access the capital markets and dilute promoters stakes.However,Irda maydisallow initial public offering,or IPO,if it thinks such issue may be detrimental to the interests of policyholders or will not be in the interest of the insurance business in the country.Insurance Regulatory Development Authority (Irda) on Tuesday released the draft guideline for approaching the capital markets.It stipulates that only life insurers that are at least 10-years old can access the capital markets.However,the guidelines keep an option under which the government may prescribe a different period that could be less than 10 years too.Reliance Life Insurance had earlier approached the regulator for doing away with the 10-year clause for tapping the capital market.

The government,however,is yet to take a decision on the proposal.Nevertheless,Moloy Ghosh,president,Reliance Life,said: Having signed a definitive agreement with Nippon Insurance of Japan,we are not looking at an initial public offer now.However,we will cross the 10-year period in January 2012. The regulator has stipulated that the embedded value of a life insurance company has to be at least twice the paid-up equity capital.

Source: Economic times