Promoters of isurance firms must hold 50% after listing

MUMBAI: Promoters of insurance companies will be forced to maintain their shareholding at 50 per cent even after listing under the guidelines proposed by the insurance regulator.

This is in sharp contrast to the banking sector where the regulator insists that promoters of banks dilute their shareholding to 20 per cent within a time frame.

What the new rules mean is that promoters will have to continue to infuse capital into the business even in future as the business grows.

The minimum shareholding requirements are part of the Insurance Regulatory and Development Authority of India's ( IRDAI) draft guidelines for listed companies.

The norms also apply to insurance intermediaries which draw more than 50 per cent of their revenue from insurance activities -which will include brokers, corporate agents, surveyors and third party administrators.
Although there are no listed insurance companies as of now in the private sector, HDFC Life and ICICI Prudential Life Insurance have said that they would go public shortly. The government is also eyeing a listing of state-owned New India Assurance and General Insurance Corporation.

The regulator has spelt out the limits for different categories of shareholders. In case of individuals and non-financial entities, the cap has been fixed at 10 per cent of the company's paidup capital.

Entities in the financial sector can hold up to 15 per cent stake in a listed insurance company.

"In the case of regulated, well diversified, listed entities from the financial sector or public sector undertaking or government, a uniform limit up to 50 per cent of the paid-up capital is permitted," IRDAI said in its guidelines.

In the case of foreign companies, the existing limits which cap foreign direct investment at 49 per cent will continue.