Minimum shareholding norm may see slew of discussions among insurers

The minimum shareholding norms at 50% for promoters in listed insurers could see another round of discussions among prospective candidates for listing. According to the draft norms by Insurance Regulatory and Development Authority of India (IRDAI) for listed Indian insurance companies, the minimum shareholding by promoters should be maintained at 50% of the paid up equity capital of the insurer at all times.

A senior insurance consultant explained in joint ventures in insurance where there are more than two joint venture partners, issues could emerge. "In multiple partner JVs, who would hold how much could become a bone of contention which would need to be ironed out before these insurers get listed," he said. However, IRDAI has said that where the present holding of the promoters is below 50%, such holding shall be the minimum holding.

Presently, foreign direct investment of up to 49% is permitted in the insurance sector. This means Indian promoter has to hold minimum 51% whereas foreign partners can hold maximum of 49%.

As per IRDAI norms, a company has to be in the insurance business for 10 years to be eligible to list on the equity market. The regulator considers the financial performance, capital structure after offer and solvency margin, among other factors, to give its approval.

It is also being said that the regulator could even make it mandatory for large life insurance companies to list within a specific period. So far, none of the insurance companies are directly listed on the stock exchanges. In its norms on 'Issuance of Capital by Indian Insurance Companies transacting Life Insurance Business', IRDAI said that it could direct an Indian insurance company transacting in the life insurance business to go for a public issue if the circumstance so warrants.

With respect to the draft norms, IRDAI said that these, would be in addition to, and not in derogation of, any other law for the time being in force, including the IRDAI (Issuance of Capital by Indian Insurance Companies transacting Life Insurance Business) Regulations, 2015 and IRDAI (Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business) Regulations, 2015.

The regulator also said that ownership limits for all shareholders, other than promoters/ promoter group, would be based on categorization of the shareholders under two broad categories, natural persons (individuals) and legal persons (entities/institutions).