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Insurers should disclose risks in IPO offer, says SEBI panel

The panel recommended that general insurance companies proposing to come out with IPOs should disclose the “claims arising out of catastrophic losses, which could impact the profitability or cash flow of the insurance companies.”

Mumbai: Clearing the decks for the Insurance Regulatory and Development Authority (IRDA) to come out with initial public offer (IPO) guidelines for general insurers, a Securities and Exchange Board of India (SEBI) appointed panel has suggested outlining risk factors in the offer document, including return from their investments, reports PTI.

“The insurance industry is different from other industries and has risks which are unique to it,” the panel said, adding that specific risk areas need to be disclosed in the offer document.

The SEBI Committee on Disclosures and Accounting Standards (SCODA) recommended that general insurance companies proposing to come out with public offer should disclose in offer document the “claims arising out of catastrophic losses, which could materially and adversely impact the profitability or cash flow of the insurance companies.”

The report of the panel, having representatives of both SEBI and IRDA, will now be used by insurance regulator IRDA to finalise the guidelines for general insurance companies to come out with IPO.

The offer document, it suggested, would outline industry specific risk factors like interest rate risk, liquidity risk, catastrophic risk, re-insurance risk, regulatory risk and market growth risk.

IRDA had last year issued IPO norms for life insurance companies.

Also they need to inform regulatory restrictions on investments and the impact of any possible default any re-insurers which could materially affect the financial condition and results of their operations.

The meeting of the panel held in January this year has suggested that the insurer should come out with overview of the entire industry and a specific format as prescribed by the IRDA.

“...considering the fact that no insurance company in India has come out with an issue so far, it is felt necessary that the investors get a broad overview of the insurance industry,” it said.

Broad parameters under which such disclosure would be made by insurance industry has been suggested, it added.

Insurance companies have to disclose financial information at regular interval to IRDA.

The panel has also given its suggestions with regard to advertisements, objects of issue, definition of Promoters and disclosure with regard to uniform financial denomination.

The sub-group recommends that report of an independent actuary on the Economic Capital of the insurance company should be made a part of the offer document.

The contents and format of the reports and criteria for actuaries who are authorised to prepare such report may be prescribed by IRDA, it said.

These suggestions are based on the study of existing practices in other global markets..

User

COMMENTS

R Balakrishnan

5 years ago

The discussion of risk factors etc is a mindless exercise. I would rather that the offer document with the price is available at least a couple of weeks before the hurried placement with fixed FIIs/DFIs. That would give time for analysts to give a view. Today, in the three day window, no one can take a view. It becomes a sheer momentum play.

REPLY

Rajkumar Singh

In Reply to R Balakrishnan 5 years ago

Sorry, not understood, seems to be a mind exercise in fine print!

Rajkumar Singh

5 years ago

Thanks for the informative news.

It appears to be a good check rule for the insurers and against the offerings of the insurance companies.

Am I correct in following it up?

Rajkumar Singh

5 years ago

Thanks for the informative news.

It appears to be a good check rule for the insurers and against the offerings of the insurance companies.

Am I correct in following it up?

Tough measures needed to make Air India survive, thrive says IATA

IATA said the Indian government should take steps to stabilise operations of the state-run carrier first so that it could survive and thrive

 
New Delhi: Tough measures need to be taken to make Air India "survive and thrive", global airlines body International Air Transport Association (IATA) said on Wednesday, asking the government to take a cue from the merger of two state-owned Japanese carriers which slashed jobs and operations to come out of bankruptcy, reports PTI.
 
IATA chief Tony Tyler, who raised the issue at a CII conference on Indian aviation, said the entire sector was in a 'multi-faceted crisis' which could be resolved by coordinated public policies.
 
"To do that, we need an 'India Inc.' approach that addresses the crippling issues of high costs, exorbitant taxes and insufficient infrastructure," the Director General and CEO of the International Air Transport Association said here.
 
Drawing a parallel between Air India merger and Japan Airlines (JAL) after its 2002 merger with Japan Air System, he said both of them faced global financial crisis, recession and fuel price hike soon after their merger.
 
Hit by these problems, JAL filed for bankruptcy in 2010. The Japanese government then launched a $3 billion restructuring plan and took "difficult decisions" to turn the merged airline around.
 
"The cuts were deep -- some 50 routes and 16,000 jobs. That's just short of a third of the workforce. With this bitter medicine, and other measures, JAL emerged from bankruptcy. After reporting a $2.5 billion profit in 2011, it plans to re-list its shares this autumn," Tyler said in a clear indication that the government should take tough steps to bring Air India out of the crisis.
 
Later when asked whether he wanted Air India to be privatised, he said he did not suggest privatisation. The government should take steps to stabilise its operations first so that the airline could survive and thrive, he said.
 

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