Govt panel restarts talks with industry, Irda; bill possible in budget session
THE much awaited Insurance Amendment Bill is expected to be presented in Lok Sabha in the budget session of Parliament this year.
The bill, a key part of financial reforms promised by the UPA government, has been in cold storage for the last few years.
However, standing committee on finance, which has been studying the bill, had recently called members of the industry and the Insurance Regulatory and Development Authority (Irda) to take their feedback on the amendment bill, leading to expectations within the industry that the bill will finally be presented this year. The budget session will start from the last week of February 2011.
“The life insurance industry is very capital intensive. Companies need huge capital to fund growth. In the meeting, we were asked to give our opinion on issues such as hike in FDI limit and listing norms for insurance companies. We have been promised that the bill will soon be presented in Lok Sabha,” a senior official, who was present in the meeting, said. Among other things, the bill proposes to raise foreign equity in Indian insurance companies from 26 per cent to 49 per cent and allow goverment-owned general insurance companies to raise funds from capital markets. The bill also proposes to delete a clause that requires insurance companies to be in business for at least 10 years before floating initial public offers. This move could pave the way for an early listing of insurers on the stock exchanges.
The deletion of Section 6AA of the Irda Act, 2000, means that any insurance company that conforms to the listing requirements of the Securities and Exchange Board of India (Sebi) and Irda will be able to go ahead with its IPO, irrespective of the number of years it has been in the business.
The section also requires mandatory listing of insurance companies on completion of 10 years in business.
After the section is removed, it will be left to the discretion of a company to decide whether or not to be listed.
A number of life insurance companies have shown interest in coming out with IPOs, but cannot because of the clause. They include SBI Life Insurance, HDFC Stan dard Life Insurance and Reliance Life Insurance.
The UPA government had presented the bill in Rajya Sabha in 2008 to ensure that it does not lapse even if the term of the UPA government comes to an end. Once the bill becomes an act, the four governmentowned general insurance companies will be able to hit capital markets to raise funds after obtaining permission from government.
The minimum investment limit for standalone health insurers is proposed to be fixed at Rs 50 crore. At present, the companies entering in insurance business, life or general, are required to have a minimum paid-up capital of Rs 100 crore. The move to lower the investment limit is expected to encourage companies with less capital to launch health insurance business and increase the penetration of this important segment of insurance business.
source :- mydigitalfc
