Irda, Sebi start work on insurance firms' IPOs

Inter-regulatory committee set up to fix norms.

Paving the way for guidelines for listing by insurance companies, the Insurance Regulatory and Development Authority (Irda) has set up a committee to finalise the norms.

This committee, appointed recently, would look at the level of disinvestment that a company could undertake through the stock market. In addition, valuation norms would also be discussed, sources close to the development told Business Standard. Apart from Irda officials, the committee also consists of members from the Securities and Exchange Board of India (Sebi). The committee is headed by Irda Member Actuary R Kannan.

The sources said that based on the committee’s recommendations, Sebi would soon issue norms for initial public offer by insurance companies.

The move would pave the way for the likes of Reliance Life Insurance to list on stock exchanges. The government is set to ease the norms to allow companies to list after five years of operation, instead of the current 10-year norm. Reliance, which had sought a relaxation, could be the first beneficiary.

An official said that the decision to lower the divestment clause had necessitated fresh norms. Under the present guidelines, the Indian promoter has to divest its stake in favour of the public. However, under the proposed norms, all partners might have to reduce their stake proportionately.

The sources said that the matter had also been examined by the Insurance Regulatory and Development Authority (Irda) and it was decided that Sebi would issue the norms.

Apart from Reliance, a host of other life insurers such as HDFC Standard Life and SBI Life could also tap the market, though they have not announced their intent formally.

Listing by insurance companies would require a special dispensation given that many of them were loss-making and followed different accounting practices.

In the run-up to the listing norms, Irda would issue guidelines related to valuation. The insurance regulator has already issued the disclosure norms for companies, which, among other things, mandated periodic disclosure of solvency levels and claim settlement. Further disclosures could also be added to the list, sources said.

In the past, the government and the market regulator have provided a special dispensation for various sectors, such as information technology, to help companies list.