New Delhi: India’s insurance regulator will finalize rules on mergers and acquisitions, and public offerings by insurance companies in a couple of months, its chairman J. Hari Narayan said on Friday.
India’s insurance laws currently do not allow companies having at least 26% stake in an insurance venture to dilute their stake before 10 years from the start of their operation.
But there has been demand from promoters to allow mergers and public offerings so that they can raise more capital and expand their operations faster. Some of the companies would complete 10 years of operations in 2010.
The Insurance Regulatory and Development Authority (Irda) chairman said it has started the process of framing guidelines.
“We have not yet finalized it,” Narayan said on the sidelines of an industry event, but added they would be finalized “very soon”.
Insurance sector has been steadily growing in India ever since it was thrown open to private players in 2000. The number of companies operating in the sector has risen to 44 from 6 during this period.
The total premium written by insurers in the life segment grew 10.8% to Rs2.23 trillion ($46 billion) in 2008-09 from a year earlier, a government report showed.
There is immense growth potential in the sector as the life insurance penetration in India is just 4% of gross domestic product, while general insurance penetration is 0.60%.
Given the high economic growth India is aiming at in the coming years, the insurance sector could see entry of many more players, analysts said.
The government now allows 26% foreign direct investment in this capital-intensive sector, which it plans to increase to 49% to meet the large fund requirements of the insurers.
Insurers are also seeking easier rules to allow them tap the equity markets for their capital needs.
“We have started dialogue with Sebi. So the process has started,” Narayan said.