NEW DELHI: The Insurance Regulatory & Development Authority of India (IRDAI) is open to insurers surpassing the 15% limit on equity holdings in a company under some conditions.
“In certain circumstances, certain companies will like to have higher exposure,” IRDAI chairman TS Vijayan told ET. “If someone wants higher exposure in a particular company, they will have to take specific permission of the authority.”
Vijayan added that such a provision is fair and follows the principles of good risk management. The move may allow Life Insurance Corporation of India (LIC), the country’s largest insurer, to participate in the government’s sale of shares in blue chip companies held by the Specified Undertaking of the Unit Trust of India (SUUTI).
Earlier this month, the government sold a 1.63% stake in Larsen & Toubro for Rs 2,100 crore. LIC didn’t take part in the stake sale. At present, LIC holds 16.04% stake in L&T, 14.34% stake in ITC and 14.47% in Axis Bank.
“If the regulator permits, the insurer can raise its stake to as high as 20%,” said a government official aware of the deliberations, adding that LIC is already in talks with IRDAI. Vijayan said the watchdog will examine each case individually.
“If some companies approach us on that, we will like to see whether that company itself is clear on what they ask for, we will examine whether all requirements are fulfilled,” he said.
The regulator would like to ensure that all the due diligence has been done. The government’s stake held by SUUTI is collectively valued at almost Rs 62,000 crore, more than the Rs 56,500 crore budgeted from disinvestment in the current financial year.
Vijayan said there is a lot of global interest in India’s insurance sector, as evinced at the recent Asian Actuarial Conference. On the impact of the Goods and Services Tax, which the government may introduce in the next financial year, the regulator said the insurance industry already pays service tax.
“Whatever initial hurdles are there will be smoothened out,” he said, adding that insurance companies have not raised any issues. The regulator noted that the challenge for insurance companies is product distribution and widening their reach.
“If you look at the economy in India, a lot of distribution is happening through the e-commerce platform…Many companies have taken initial steps,” Vijayan said. On the issue of listing state-run general insurers, Vijayan said the government has decided in principle to list the companies. “Officially, they have not told us,” he added.
ET View:
A policy flip-flop to ensure that the government has ready takers for shares of companies that it holds through SUUTI is not a good idea. Exposure to a single investee company is capped to ensure diversification of risk in an insurance company’s equity portfolio. A diversified portfolio is in the interest of policyholders. A case to case approval by IRDAI goes against the grain of equal treatment of all insurers.
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Source: Economic Times
