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INDIA BUSINESS WORLD - November 16th December 31st 2008
INSURERS TO GET M&A NORMS IN MARCH
THE Insurance Regulatory and Development Authority (Irda) will announce guidelines for mergers and acquisitions (M&A) in the insurance sector by the end of March 2009. The regulator is formulating the guidelines in consultation with the Institute of Actuaries, Irda chairman J Hari Narayan said.
“Given what is happening in the financial markets, it is an opportune time for mergers and acquisitions,” Narayan said at a seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci).
There are no specific guidelines for M&A activity in the insurance sector in the country as of now. There are 21 life insurance companies and 20 non-life insurance companies operating in the country at present.
The regulator may also allow the insurance companies to outsource some parts of their business which are not directly linked with the insurance of their customers. “We are considering allowing insurance firms to outsource non-core businesses, which is prohibited currently and also looking at rationalisation of insurance intermediaries,” Mr Narayan added.
The country’s insurance sector will grow 17% in the current financial year if the economy continues to expand at the pace it did in the September quarter. India’s economy grew at 7.6% in the July-September period. “If GDP grows 7.6%, premiums would grow 17%” Mr Narayan said. He also said the terror insurance pool would grow significantly in the wake of the recent terror attacks in Mumbai. “Terror insurance products are also bound to be upgraded and the premium rates might change depending upon the evolution of new products that the industry will come up with,” he said. He, however, added there are no imminent reasons why the premium rates of existing products should go up.
Life insurers, which constitute the bulk of the Indian insurance market, grew their business by 23.3% to Rs 93,000 crore in 2007-08, while general insurers posted growth of about 14% in premium income to Rs 29,800 crore, according to Irda data.
The Irda chief also said the regulator is not in favour of relaxing the solvency norms at the present juncture. On settlement of claims Mr Narayan said the present rate of claim settlement at 70% is unacceptable. The regulator is also planning to put in place a data warehouse by January next year, which will enable the industry to improve its understanding of the markets and trends.
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