Valuation on basis of embedded value to be mandatory.
The Insurance Regulatory and Development Authority (Irda) plans to make valuation of companies based on embedded value mandatory from this financial year. The norms for this are likely to be issued within the next two months.
More transparency in disclosure and embedded value was necessary if insurance companies wanted to tap the capital market, Hari Narayan, chairman of the Insurance Regulatory and Development Authority (IRDA), said in Kolkata.
The regulator was also in talks with the Securities Exchange Board of India for issuing disclosure norms for insurance companies in line with the International Financial Reporting Standard, he said.
“The disclosures that are mandatory for insurance companies at present are narrow and shallow, less than even in countries like Thailand and Malaysia. Unless the quality of disclosures improves, it will not be possible for the companies to go for IPOs (initial public offers). We will be plugging gaps in disclosure and embedded value norms,” he said.
“We have constituted a study on embedded valuation. The Institute of Actuaries will submit the note in two months,” he said. Also, there was a shift towards traditional products from unit-linked insurance products (ULIP), which was healthy, said Narayan.
He said Irda was worried about the management expenses of insurance companies, adding that there was a need to cap management pay.
“We have put a cap on what policy-holders can be charged for paying to the managerial staff,” he said. Also, the regulator would not allow the insurance companies to outsource core services, he said.
