The Insurance Regulatory Development Authority of India (IRDAI) will come out with a decision in a months time on allowing private equity (PE) firms to buy stake in insurance companies, its chairman T.S. Vijayan said on Friday.
"In insurance companies, we look at it in two different ways -- investors and promoters. Anybody can invest in the company, for promoter, we are studying (as to) what is the feasibility. If at all somebody is coming, what are the conditions that need to be in place," Vijayan said here while inaugurating The Associated Chambers of Commerce and Industry of Indias' (Assocham) Global Insurance Summit.
"We have put a team, we are legally examining it and we will take a decision in a month or so,"
The IRDAI chairman also said that IRDAI has though just formed a committee for risk based capital model but gave no deadline for its introduction.
"In IRDAI we have things like 150 per cent of solvency margins irrespective of numbers etc. We are trying to move towards risk-based capital model. We have started forming a committee and have started discussion, it will take time as it is not an overnight type of thing.
"The knowledge papers are prepared, committee is prepared and it will take some time to evaluate that because we have factor based capital so far and frequent changes are not good in this. We are evaluating, studying, taking opinions from industry and professionals and going forward, there is no time frame as of today," he added.
He also said that IRDAI was also looking at risk based supervision. "With the co-operation of insurance companies, we should be able to monitor their result on a very frequent basis and go on-site inspection only when it is required and try to control that."
He said that with International Financial Reporting Standard (IFRS 17) coming in 2020, these type of changes in accounting standards and the necessity for insurers to raise capital to support this growth are some of the changes that the industry needs to go through.
He also said that no decision had been taken on short-term money coming into insurance sector. "This is one question we are debating."
On lot of insurance companies going for initial public offering (IPO) and the valuation they are getting, the IRDAI chairman said that the regulator is merely looking at the solvency margin and whether the shareholder is paying for a share is not its concern.
He further said that there are more than 50 companies and it will be good if all the companies are coming to the market. He however said that IRDAI is not forcing them to come out with an IPO.
On impact of public sector banks' merger on their insurance joint venture, Vijayan said: "So far we have not allowed one entity to promote more than one insurance company but if parent companies are getting merged, that will be a challenge. We have to see at that time."
He further said that while PMFBY (Pradhan Mantri Fasal Bima Yojna) has been a success and it increased insurance penetration to a great level, such schemes need building up of reserves, reinsurance support and evaluation of the extent of damages.