Fresh round of talks likely to take place for insurers

Irdai rule says, for listed insurers, minimum shareholding by the promoters should not be below 50% of the paid-up equity capital

There could be another round of discussions on the minimum shareholding norms, at 50 per cent for promoters in listed insurers, among prospective candidates for listing. According to draft norms issued by the Insurance Regulatory and Development Authority of India (Irdai) for listed Indian insurance companies, the minimum shareholding by promoters should be maintained at 50 per cent of the paid-up equity capital of the insurer at all times.

A senior insurance consultant explained in joint ventures (JVs) in insurance, where there are more than two joint venture partners, issues could emerge. "In multiple partner JVs, who would hold how much could become a bone of contention which would need to be ironed out before these insurers get listed," he said. However, Irdai has said where the present holding of the promoters is below 50 per cent, such holding shall be the minimum holding.
 

Currently, foreign direct investment of up to 49 per cent is permitted in the sector. This means the Indian promoter has to hold at least 51 per cent.

According to Irdai norms, a company has to be in the insurance business for 10 years, to be eligible to list on the equity market. The regulator considers the financial performance, capital structure after offer and solvency margin, among other factors, to give its approval.

It is also being said that the regulator could even make it mandatory for large life insurance companies to list within a specific period. So far, none of the insurance companies are directly listed on the stock exchanges. In its norms on 'Issuance of Capital by Indian Insurance Companies transacting Life Insurance Business', Irdai said it could direct an Indian insurance company transacting in the life insurance business to go for a public issue if the circumstance so warrant.

With respect to the draft norms, Irdai said that these would be in addition to and not in derogation of any other law for the time being in force, including the Irdai (Issuance of Capital by Indian Insurance Companies transacting Life Insurance Business) Regulations, 2015, and Irdai (Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business) Regulations, 2015.

The regulator also said that ownership limits for all shareholders, other than promoters/promoter group, would be based on categorisation of the shareholders under two broad categories, natural persons (individuals) and legal persons (entities/institutions).