Life insurance companies get rules for public offers

By Anshuman Sakle, Khaitan & Co
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The Insurance Regulatory and Development Authority (IRDA) in November notified the IRDA (Issuance of Capital by Life Insurance Companies) Regulations, 2011, which pave the way for life insurance companies in India to raise capital through public issues. The regulations formalize the eligibility criteria for life insurance companies to raise capital and prescribe additional disclosure requirements for the offer documents of life insurance companies.

This is the first time that an industry regulator has laid down requirements additional to those of the capital markets regulator, the Securities and Exchange Board of India (SEBI), in this regard. A life insurance company proposing to approach the capital markets must obtain prior permission from the IRDA before approaching SEBI for the necessary clearances. Only companies which have completed 10 years of business in India are eligible to apply.

Assessment process

The IRDA will assess the overall financial position of the company, its regulatory record and record of compliances, the proposal for the issue or offer of capital, the post-issue capital structure of the company, and the company’s objects for raising capital. The regulator will also evaluate the company’s maintenance of the prescribed regulatory solvency margins at the end of the six quarters preceding the application, its record of policyholder protection and its adherence to the IRDA’s corporate governance guidelines.

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Anshuman Sakle is an associate at Khaitan & Co. Khaitan & Co is a full-service law firm with offices in Mumbai, Delhi, Bangalore and Kolkata. Views expressed in the article are those of the author and do not necessarily reflect the views of the firm.

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