IRDAI urges more insurance companies to list

The insurance regulator on Friday urged more insurance companies to list on the bourses as it would make them more efficient in operations and transparent in disclosures.

“Listed insurance companies are doing quite well in terms of good valuation. I urge other insurance companies to start listing as they cross a critical mass,” said Subhash Chandra Khuntia, Chairman, Insurance Regulatory and Development Authority of India (IRDAI).

Addressing the Assocham Insurance Summit, Khuntia said that listing helps companies provide more disclosures, abide by market discipline and makes their conduct more efficient.

The IRDAI had earlier issued a draft that all insurance companies that have completed 10 years of operations should list on the stock exchanges.

Speaking to reporters on the sidelines, Khuntia however, said that some of them have been finding it difficult as they have not crossed the critical size. “We are not forcing them, but am nudging them,” he said, adding that Reliance General Insurance had taken permission but due to group level problems, it may not go through with it now.

PSU bank consolidation

The IRDAI is also working on issues relating to consolidation of public sector banks as many of them are also promoters of insurance companies.

Under current norms, the IRDAI does not normally allow one bank to be the promoter in more than one insurance company. Additionally, each bank is allowed to be corporate agent of only three insurers of the same type at a time.

In case, a merged bank has promoter stake of more than 10 per cent in an insurer and wants to continue, then the IRDAI is looking at whether the bank can be allowed to do so without being involved in the management of the company. “If they give up directorship of the board, they can hold the shares. It will take care of issues of conflict of interest. Many times, banks feel it will be a valuable share and they should not give up. So we are looking at that angle as well,” Khuntia said.

Alternatively, they can reduce their stake to less than 10 per cent and lose the promoter tag and continue holding the shares.

Khuntia said that for corporate agency, banks will have to opt for only three insurers. But they will get a smooth transition time to ensure that policyholders are not affected. “They will have to decide, which three to keep, and which to divest,” he told reporters.

The IRDAI has also written to Life Insurance Corporation of India to give a timeframe for reducing its shareholding in IDBI Bank. The life insurer currently holds 51 per cent equity in the bank as against the mandated 15 per cent cap. The IRDAI had made a one-time exception for LIC.