Insurers with 10 yrs operation to tap capital mkt

June 22, 2011   ·   0 Comments

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

www.stockssavvy.comThe companies which have completed 10 years of operations include ICICI Prudential Life and HDFC Standard Life.  Insurance sector was opened to private sector in 2000. The 10-year clause for public offer is also a part of  Insurance Act, 1938.

For approval, the insurer should have maintained a satisfactory regulatory record, 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.

HDFC & ICICI may come up with their IPO’s ready for the insurance segment in the later half of the year. This will be one opportunity in stock market which will be a wealth creator for years to come.


Rajesh Singla

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