Insurance IPO norms on the home run

The insurance and capital market regulators are likely to finalise the much-awaited listing norms for insurance companies at a meeting of a sub-committee this week.

Insurance companies will have to follow the Securities and Exchange Board of India’s listing norms on initial public offerings (IPOs).

A senior official of the Insurance Regulatory and Development Authority (Irda) said this would be the last meeting with the market regulator for finalising the guidelines. The committee is headed by Irda’s Deputy Director RK Sharma.

He said, “Irda had laid out the disclosure norms. Since the nature of insurance business is different, there is a need for detailed disclosures. We are done with our work. Sebi will now come out with the final guidelines. It will be similar to the one applicable to company listings.”

He added the entire book-building process would remain the same as for any other company. Sebi will decide on giving special dispensation, as many of them are loss-making and follow different accounting practices.

Before coming up with the IPO norms, Irda had to come up with both disclosure and valuation norms. The insurance regulator has already issued the disclosure norms for companies, which, among other things, mandated the disclosure of solvency levels and claim settlement on a half-yearly basis. It has assigned the Institute of Actuaries of India (IAI) to frame the valuation guidelines.

IAI President GN Agrawal said the institute would take at least one month to form the final guidelines on valuation and economic capital. The institute has prepared the draft and circulated to the insurers.

In a circular sent to the life insurance companies, the insurance regulator had earlier said the valuation of the companies would be based on market consistent embedded value (MCEV). This is calculated on the basis of the value of in-force covered business, free surplus allocated to covered business and required capital.