Insurance M&A norms to be out in 2-3 months: Kannan

Posted By: Pti
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Mumbai, Feb 21 (PTI) Insurance Regulatory and DevelopmentAuthority (IRDA)will come out with guidelines for mergers andacquisition for the industry over the next two-three monthswhile the IPO norms will be out in thenext 15-20 days, a senior official said today.

"We have been examining the pros and cons of the mergersand acquisition in the industry and we are sure to come outwith the final guidelines within the next two to threemonths," IRDA Member-actuaries, R Kannan, told newsmen here onthe sidelines of an international conference on actuaries.

When asked about the IPO norms for insurance companies,Kannan said, "they (the initial public offering guidelines)will be out within the next 15-20 days."

Early this fiscal, the Anil Ambani group companyReliance General insurance had expressed its readiness to takeover the Chennai-based Royal Sundaram Alliance Insurance bybuying out the entire 74 per cent stake of the domesticpromoter Royal Sundaram.

But when the group approached for regulatory nod, it washeld back as there were no proper regulatory systems in placeon the M&A norms in the insurance space.

Royal Sundaram Alliance Insurance is a joint venturebetween the Sundaram Group and the England-based RSA, whichowns 26 per cent stake in the company. .

When asked about the number of companies that have approached the regulator for takeovers, he said, so far onlyone company has formally approached it.

"We would know of any such interest only after thatcompany''s application is dispensed with," he said.

As and when it happens, the Reliance-Royal Sundaramdeal will the first in the non-life space, while in the lifeinsurance space such a deal took place in the past whenReliance Life acquired AMP Sanmar in 2005.

Both Reliance Life and Reliance General are part ofReliance Capital, the Anil Dhirubhai Ambani Group''s financialservices arm.

Recently, the capital market regulator SEBI had acceptedthe revised IPO guidelines that the IRDA had submitted to itwhich would be notified soon.

Since the privatisation of the insurance sector, as manyas 23 private players have set up shops in the country withforeign participation, which is capped at 26 per cent.

While allowing FDI into the sector, it was stipulatedthat foreign partners cannot quit the JV before 10 years. Manyprivate insurers will be completing one decade of operationsby April this year, and therefore are free to go public, whichwould give their foreign partners an option to call off theirjoint venture by divesting their stake.

Today these 23 private life players are sitting on anasset base of Rs 12-trillion.

While the final IPO norms are awaited, many playerslike Reliance Life Insurance, ICICI Prudential and HDFCStandard Life have announced plans to tap the capital market.

But investment bankers and analysts are of the opinionthat unless the Insurance Bill is passed, which seeks toincrease the FDI limit to 49 per cent from the present 26 percent, there won�t be any impact on the IPO norms.

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