M&A guidelines for insurance sector by fiscal-end

M&A guidelines for insurance sector by fiscal-end

New Delhi: In order to encourage consolidation in the private sector insurance industry, the regulator IRDA has said that it would come out with a framework for mergers and acquisitions (M&A) for the sector by the end of current fiscal.

“Given what is happening in the market, it is an opportune time for mergers and acquisitions," IRDA Chairman J Hari Narayan said.

“Appropriate guidelines for M&A in the insurance sector was being worked out," he said, adding: “The exposure draft (draft guidelines) would be ready by March 2009."

As of now, there are no specific guidelines for M&A activity in the insurance sector in the country.

There are 21 life insurance companies and 20 non-life insurance companies operating in the country righ now.

Asked about changes in the solvency margin for the insurance sector, the regulator said that it might be imprudent to relax solvency norms in the current situation. “Certain amount of conservatism towards solvency regime has proved beneficial," Narayan added.

“So, I think to expect wide-ranging changes in the solvency requirement in the insurance sector is immature and even be imprudent at this point of time," he said.

Expressing concern over the widening asset-liability mismatch, IRDA chief said: “We are getting into asset-liability mismatch of varying degrees. There is a lack of long-term securities in the market, which might impact certain kind of liabilities."

Narayan added that IRDA would be taking up issues concerning asset-liability mismatch with the Finance Ministry.