The insurance regulator has scrapped the minimum three year profitability clause for life insurers to float initial public offerings, throwing a lifeline for many companies that would have struggled for capital. The Insurance Regulatory and Development Authority , or Irda, took the decision in a recent board meeting, two people familiar with the matter said.
The decision to do away with the requirement, which was part of the draft guidelines for IPOs, follows lobbying by insurance firms that the absence of higher foreign investment and access to public funds could cripple their businesses. Valuing insurance companies in India may become tricky with some arguing they are at a growth stage and the market has huge potential. While insurers may look for high valuations due to market potential, their losses could be talked down as it happened in the case of dotcom companies. The insurance regulator had prescribed a minimum embedded value for which the insurers objected to and sought flexibility.
SOURCE-http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/irda-scraps-profit-rule-for-life-insurance-ipos/articleshow/9131020.cms
