India regulator proposes mandatory listing for insurers

The Insurance Regulatory and Development Authority of India (IRDA) has proposed to make it mandatory for all insurers to go public after they complete a specified number of years of operations as part of efforts to improve transparency and corporate governance standards.

General insurers will have to list on the bourses after completing eight years of operations and life insurers will have to go public when they complete 10 years, the regulator said in a discussion paper.

Insurers that have already exceeded the number of years mentioned must get listed within three years of the issue of the final listing guidelines, it suggested and sought comments by 1 September. 

The proposals, if implemented, could lead to a barrage of share sales in an industry where 55 insurance companies operate but only one--Max Financial Services Ltd, the parent of Max Life Insurance Co.--is listed on the bourses.

The regulator said that 32 insurance companies have completed 10 years of operations, but only two have applied for listing thus far. 

HDFC Standard Life Insurance Co. had previously announced plans to go public but it is now acquiring Max Financial to create India's biggest private-sector life insurer. ICICI Prudential Life Insurance Co. is looking to become the first Indian insurer to float an IPO.

The proposed listing guidelines come after the Indian government last year amended laws governing the insurance industry and deleted provisions that required companies to complete at least 10 years of operations before going public.

Of the 55 insurance companies, 24 are in the life insurance business and 30 in non-life insurance. In addition, state-run General Insurance Corporation is the sole national reinsurer. Only eight of the 55 companies are state-run and the remaining are in the private sector. 

The IRDA said the government has also announced its intent to get GIC and one other general insurance company listed on the bourses. "These efforts are aimed at unlocking the value of the equity held by the shareholders in the respective companies," it said. 

The regulator said that all Indian insurance companies which meet its criteria will have to take up the matter of listing to their board within three months from the date of issue of the final guidelines. The company will have to file a road map for the IPO with the IRDA within 45 days from the date of approval by the board and initiate action for the share sale within a period approved by the regulator. 

The regulator also said that the timeline of at least eight years for general insurers and 10 years for life insurers is more than the Reserve Bank of India's six-year deadline for new banks to get listed on bourses. This is because the insurance industry is capital intensive and it longer for an insurance company to stabilise operations. "This is more particularly true in case of a life insurance company due to the new business strain," it said. 

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