IRDA issues IPO Regulation for Issuance of Capital by Life Insurance Companies

IRDA Regulations, 2011Issuance of Capital by Life Insurance Companies in India

IRDA has released the guidelines for Issuance of Capital by Life Insurance Companies, paving the way for life insurers who have completed 10 years from the date of commencement of business to raise share capital through a public issue. 

The Highlights of Issuance of Capital Regulations, 2011 are:

Life insurance companies who have completed 10 years can propose to raise share capital through IPO

Approval is required from IRDA

Approvals granted by IRDA will be valid for 1 year from the date of issue of the approval letter

Within the one year period, the life insurance company must file the Draft Red Herring Prospectus (DRHP) with SEBI under the ICDR Regulations

IRDA reserves the right not to accord its approval 

If the IRDA holds the right to not grant its approval if it feels that the applicant life insurance company is not compliant with the regulatory framework; or it may not be in the interest of the insurance business; or if it may be damaging to the interests of policyholder.

The insurance regulator will consider the company’s overall financial position, its capital structure post offer of capital or issue, its regulatory record, and the purpose for raising capital through IPO.

IRDA shall consider the following before granting approval for IPO:-

The history of compliance by the life insurer with the regulatory framework

Maintenance of the prescribed regulatory solvency margin as at the end of the preceding six quarters starting from the quarter immediately prior to the date of filing application

Compliance with Corporate Governance Guidelines and disclosure requirements mandated under IRDA circular dated 28th January, 2010

Embedded Value of the applicant life insurance company

Regulator has not given a specific timeline for processing and granting its approval, it will expedite its process and ensures that the applicant life insurer will get a prompt response to all queries and requests.