Sebi to Seek Full Disclosure for Listing Applicants in Insurance Sector

Securities & Exchange Board of India (Sebi) will seek complete disclosure from insurance companies looking to list on the stock exchanges. This will include embedded value, details on policies, value of new business and their maturity apart from financial information. At present, not all insurers give out details on embedded value since they were not required to by the insurance regulator.

A Sebi official said, "Any company planning to list and approaching Sebi with Draft prospectus will have to adhere to Sebi strict disclosure Norms. In case ofinsurance cos Sebi will insist on declaration of embedded value, policy maturity time table, audit qualification among others. IRDAI disclosure norms have been made in consultation with Sebi."

In its discussion paper on listing, Insurance Regulatory and Development Authority of India (IRDAI) had proposed to ask some insurance companies to mandatorily list on the exchanges based on the number of years they have been in business. In its discussion paper on listing of Indian insurance companies, IRDAI said that they would issue directions for general insurers (including health and reinsurers) to take steps to get listed post completion of eight years of operations. All life insurers will have to take steps to get shares listed on completion of 10 years.

"In the run-up to the listing, all insurance companies shall initiate steps to ensure that the level of disclosure in public domain is brought up to the level of listed entities as stipulated by IRDAI and Securities and Exchange Board of India (Sebi). These disclosures could cover such aspects as embedded value, segment wise lapsation of policies and contribution of profitability, among others," said IRDAI.

The regulator said that all insurers which have already exceeded the number of years of operations to get their shares within three years from the date of issue of the guidelines. IRDAI said that 32 insurance companies in life, general and reinsurance have completed between 10 years of operations. Of these, only two life insurers have applied for getting their shares listed on the stock market.

If these norms are brought out, all big life and general insurance companies would have to get listed. In an earlier guideline on insurance companies' listing, IRDAI had said that they can direct an Indian insurance company to list on the stock exchanges if circumstances so warrant. It had also said that such company, within a period of one year from the date of such directions, comply with the directions issued by the Authority.

Apart from ICICI Prudential Life Insurance which is to get listed on the stock exchanges and HDFC Life-Max Life which have signed an agreement to merge, only SBI Life Insurance has stated its embedded value. SBI Life's embedded value as on March 31, 2016 stood at Rs. 12,999 crore.

Insurance officials said that predictive financial information on business in the future would be a challenge, given the nature of the business. "The first quarter of a financial year is generally slow. Hence, if are to give predictive new business data, it will not be accurate," said the chief executive officer of a mid-size private life insurance company.

At the end of July 2016, there are 55 insurance companies, of which 24 are in life insurancebusiness and 30 are in non-life business, apart from one reinsurer. In life insurance, 16 companies have completed 10 years of operation, while in general insurance 12 have completed 10 years. In health insurance, there is only one company who has completed 10 years.

If listing is made mandatory for at least the large players, this would mean that the process of disclosure would have to begin from the next few quarters itself.