10-year track record tops IRDA norms for IPO by life insurers

Our Bureau Hyderabad | Updated on June 24, 2011

Insurance companies which have completed 10 years of operations are now eligible to go for initial public offer (IPO).

Prior to filing of the draft document for issue of share capital or making public offer with the Securities and Exchange Board of India (SEBI), the insurance company should take a “formal approval” from the Insurance Regulatory and Development Authority (IRDA).

For approval, the insurer should have maintained a satisfactory regulatory record, Mr J. Hari Narayan, Chairman, IRDA, said in the draft guidelines on Issues of Capital and Disclosure Requirements (ICDR) for life insurance companies announced on Tuesday.

The objective of the public issue could be to augment solvency requirement and general corporate purposes.

Financial statements for a period of last five years should be provided along with gross premium, cross-selling, operating expenses ratio, investment yield, liability of future policy benefits and manner of arriving at unrealised gain/loss.

In addition to meeting the disclosure norms laid down by SEBI in ICDR regulations, any insurance company should also disclose risk factors specific to the insurance companies.

An overview of insurance industry, disclosure of financial statements, particulars about the issue and insurers should also be provided.

The risk factors to be mentioned in the offer documents should cover risks arising out of insurance risk (mis-estimation and fluctuations in the frequency of claims) besides market, credit, liquidity and operational risks, the guidelines said.

The guidelines would come into force after their notification in the Gazette, IRDA added.

At present, there are 24 life insurance companies approved by IRDA while about four/five of them would have completed 10 years of operations.

Published on June 21, 2011

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