Strict disclosure guidelines for insurance IPOs

The insurance regulator is expected to announce norms in 30-45 days.

The Economic Survey has called for higher disclosure norms from insurers who are planning to tap the capital market through initial public offers (IPOs).

“Several insurance companies will be completing 10 years of operations, after which they may be allowed by the regulator to go in for an IPO. It is essential that the investors be made fully aware of the financial performance, company profile, financial position, risk exposure, elements of corporate governance in place, and the management of such insurance companies,” said the report.

The report also noted that the Insurance Regulatory & Development Authority (Irda) is in meetings with the Standing Committee on Disclosures and Accounting Issues set up by the market regulator to finalise the disclosure requirements for insurance companies in their prospectus documents. It is proposed that the disclosure requirements for life and non-life companies would be separately mandated.

Irda is expected to come out with the IPO guidelines in the next 30-45 days. It has already indicated that it would be mandatory for inurers to declare the profitability of their individual products like Ulips, pension or annuity, endowment etc, in their balance sheet. This apart, the insurers have to disclose premiums, commission expenses, operating expenses, on an annual, half yearly and quarterly basis.

New pension system
The penetration and distribution of the new pension scheme in the unorganised sector remains a major challenge.The scheme has failed to take off even after direct contribution of Rs 1,000 per account from last year under the Swavlamban scheme. Hence, the government has called for a quicker passage of the long-pending PFRDA Bill in order to give a fillip to the pension sector.

Going by the pre-Budget Economic Survey for 20101-11, the important challenges before the PFRDA are to expand the distribution network of the NPS, educate investors to take investment decisions and improve financial literacy.

In the unorganised sector, nearly 34,000 subscribers had joined the NPS as of December 2010 on a voluntary basis. The subscriber base in the newly launched NPS-Lite is around 5,000. The NPS is currently available through 5,000 service provider branches of 35 point of purchases.