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Headline : IRDA scrutinises role of PEs as promoters of insurance companies
 
News Date : Sep 22, 2017
Source : AIP NewsBureau
 
IRDA Chairman talks about performance rating of the insurance company

Mumbai:


Even as large private equities have started investing in well known Indian insurance majors, the insurance regulator IRDAI has started scrutinising whether private equities will make good promoters of  insurance companies.



“In insurance companies, we look at it in two different ways—investors and promoters, anybody can invest in the company,for promoter, we are studying (as to) what is the feasibility, if at all somebody is coming what are the conditions that need to be in place,” said TS Vijayan while inaugurating an ASSOCHAM Global Insurance Summit on Friday.

 


“We have put a team, we are legally examining it and we will take a decision in a month or so. We will come out with a decision in a month’s time on allowing private equity (PE) firms to buy stake in insurance companies,” added IRDAI chief.

 


He also informed that no decision had been taken on short-term money coming into insurance sector. “This is one question we are debating,” he added.



Industry sources estimate around $1 billion PE investment by PEs in the Indian insurance sector.

  


Recently, Canadian billionaire Prem Watsa’s Fairfax Financial Holdings sold 12.18% of its stake in general insurance ICICI Lombard General Insurance to private equity firms Warburg Pincus, Clermont Group and IIFL Special Opportunities Fund, the company.



Minority shareholders Value Life Pte, an affiliate of KKR Asian Fund and MacRitchie Investments Pte, a wholly—owned subsidiary of Temasek Holdings, hold 1.95 per cent each in SBI Life.



HDFC Life and Max Life also have investments by PEs.



On lot of insurance companies going for initial public offering (IPO) and the valuation they are getting, the Vijayan said that the regulator is merely looking at the solvency margin and whether the shareholder is paying for a share is not its concern.



Acko General Insurance which has received license from  IRDAI this week to start operations, is backed by PEs, including Narayana Murthy's Cataraman.


 

A new health insurance firm promoted by former MetLife CEO Rajesh Relanm which has applied for a licensem is backed by Arth Capital and Macquarie investment fund. 



On lot of insurance companies going for initial public offering (IPO) and the valuation they are getting, the IRDAI chairman said that the regulator is merely looking at the solvency margin and whether the shareholder is paying for a share is not its concern.



He further said that there are more than 50 companies and it will be good if all the companies are coming to the market. He however said that IRDAI is not forcing them to come out with an IPO.



“What also we have done is that, insurers are investing huge amount of money in this market, we thought we would bring-in stewardship code on how to do it, how they are investing, how they are responsible for the investments,” said Vijayan.



He also said that there is a need to talk about performance rating of the insurance company.



“How much claims they are settling, how soon they are settling, what is their claims ratio, if it is adequate, rather than price, whether the value of insurance can be compared by the customer before going for a policy.”



He also revealed that IRDAI is also looking at risk based supervision. “With the co-operation of insurance companies, we should be able to monitor their result on a very frequent basis and go on-site inspection only when it is required and try to control that.”



He also informed that IRDAI has though just formed a committee for risk based capital model but gave no deadline for its introduction.



On impact of public sector banks’ merger on their insurance joint venture,  Vijayan said, “So far we have not allowed one entity to promote more than one insurance company but if parents are getting merged, that will be a challenge, we have to see at that time.”



“The knowledge papers are prepared, committee is prepared and it will take some time to evaluate that because we have factor based capital so far and frequent changes are not good in this. We are evaluating, studying, taking opinions from industry and professionals and going forward, there is no time frame as of today,” he added.

 

 
 

 
 

 
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