Insurance companies hitting the public market will have to appoint an independent actuary as part of IPO and M&A norms to carry out valuations.
The Insurance Regulatory and Development Authority (Irda) is working on initial public offer (IPO) and mergers and acquisitions (M&A) guidelines.
R Kannan, Member, Actuary said, “While the appointed actuary will carry out the valuation the independent actuary will certify it.”
The independent actuaries will be appointed by the shareholders of the insurance companies. The appointed actuary works on pricing of the products, actuarial functions of the company and valuations of assets and liabilities. Moreover, he assures that the company complies with the regulatory guidelines.
| CALCULATING RISKS |
| * The independent actuaries will be appointed by the shareholders of the insurance companies |
| * The appointed actuary works on pricing of the products, actuarial functions of the company and valuations of assets and liabilities |
| * Globally, independent actuaries looks at the effects of investment management, new business strategy, administration, expense levels and valuation |
Irda Chairman J Harinarayan had recently said that the regulator will come up with the guidelines by October.
Kannan added that internationally when an insurance company goes for an IPO or an M&A it involves two actuaries. He added that the independent actuary will form an independent judgment on the quality of the work and the valuations carried out.
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Globally, independent actuaries looks at the effects of investment management, new business strategy, administration, expense levels and valuation. “We want to ensure that if there is a shortfall, the acquirer should be able to serve till the last day of the policy,” added Kannan.
Paresh Parasnis, Principal Officer and Executive Director, HDFC Standard Life said, “This will be a peer review of the work carried out by the appointed actuary. He will look into the methodology of reaching to the valuation.”
HDFC Standard Life is expected to be the second insurer after Reliance Life to hit the market. Insurers are working on reaching to valuations. According to an India Infoline report, Reliance Life is valued at $2.13 billion, SBI Life at $2.62 billion, HDFC Standard Life at $ 1.62 billion, Bajaj Allianz Life insurance at $2.29 billion and ICICI Prudential at $ 3.87 billion.
A large private insurance company’s chief executive officer ruled out the need of an independent actuary.
Private sector insurer Reliance life has already applied for an IPO. The company plans to divest 26 per cent stake through public offering.
The regulator is, however, working on the guidelines and the ambiguity over the 10 years of listing clause is expected to resolve once the insurance bill is passed, which includes raising foreign direct investment in insurance sector to 49 per cent during the winter session.