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The proposal to make listing of life insurance companies mandatory has been set aside for the next two years. The decision has been taken by Insurance Regulatory and Development Authority (IRDAI) to enable insurers to themselves move towards the listing process from now on, sources told Moneycontrol.
This includes having sustainable profitability as well as improving persistency — the rate of policy renewal after the first year — and reducing operating expenses. Currently, only one insurance company, ICICI Prudential Life Insurance, is listed on the stock exchanges.
Five public general insurers — New India Assurance, General Insurance Corporation of India, National Insurance, Oriental Insurance and United India Insurance have received a Cabinet nod for an initial public offering (IPO). The insurance regulator had earlier proposed mandatory listing of large insurers. The proposal met with stiff opposition from several players who contended that this was not known to them at the time of entering the business.
“In the banking sector, it is clear from Day 1 that they will have to get listed in the near future. No such requirement was made compulsory for players entering the insurance market,” said the chief executive of a private life insurer. As per IRDAI rules, 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. In its regulations on Issuance of Capital by Indian Insurance Companies transacting Life Insurance Business, IRDAI had said that it could ask any life insurer for a public issue if the circumstances warrant.
When the insurance industry was opened up in 2000, there was an informal understanding that companies would go for a public listing by 2010. However, none of them came forward to do so and it was only last year that the first listing happened.
Apart from additional disclosures, a standardised format of reporting the key numbers including new premiums, solvency ratio as well as persistency will be applicable for insurance companies. Further, changes in the accounting practices will also be implemented from April 2018 when Ind-AS is implemented.
During the financial year 2015-16, life insurance segment reported an overall profit of Rs 7,414.97 crore against Rs 7,611.31 crore in FY15. Nineteen of the total 24 life insurers reported profits in FY16. For the non-life insurance industry, the total net profit slipped to Rs 3,238 crore as against a profit of Rs 4,639 crore in FY15.
