IRDA proposes to change option, General Insurance companies may not need to list shares

The Insurance Regulatory and Development Authority (Irda) proposes to give an option to general insurance companies to stay back from listing their shares, but the regulator retained the right to order any in the industry to take the company public.

"The draft regulations plan to make no provisions for mandatory divestment," Irda said in a draft circular."It empowers the Authority to issue direction to an Indian insurance company to go for an initial public offering (IPO) if the circumstance warrants so. Such a company , within a period of one year from the date of such direction shall comply with these regulations." This is an escape route for general insurers who do not plan to list their companies. Earlier, the Insurance Act 1938 has made it mandatory for insurance companies to divest shares after 10 years into operation, be it life or general insurance companies.

There are 24 general insurance companies, of which six are specialised insurance companies dealing with health, agriculture and credit insurance. No general insurance companies have expressed any in tention to raise capital through diluting shares to the public. In the life insurance sector, HDFC Life is expected to be the first to list its shares on the stock exchanges.

"Irda has started consulting and engaging with the industry on all key issues which is very positive," said a CEO of a general insurance company. Irda  has asked companies to respond by October 9. The Amendment to the Insurance Act brought in by the government has given power to the regulator to frame rules including capital raising and listing. State-run insurers such as Oriental Insurance can also go for an IPO as the new Insurance Act permits them over the General Insurance Business (Nationalisation) Act, 1972. 

Source: http://generalinsuranceindia.weebly.com/blog/irda-proposes-to-change-option-general-insurance-companies-may-not-need-to-list-shares

General Insurance – An Introduction

The Insurance business is broadly divided into two major categories first is Life Insurance and other one is General Insurance. The Life Insurance covers the loss to Human Life whereas the General Insurance is primarily a Non-Life Insurance, which covers risk associated with various things/affairs one found precious enough to be covered under an Insurance.

It is true that the Human Life is most precious asset one can protect but at the same time it is also an undisputed fact that with the passing time several other assets took place in human life which are inevitably part of our day to day life. Human beings have now become materialistic and hence the value of a Human Being also derived from the material assets he possess. This may include your house, vehicles, shops and daily used utensils and equipment etc.

All the assets you possess are open to various risks and it is always a possibility that these assets can be destroyed or may be harmed in a manner whereby its value get decreased by damage caused by any uncertain/unforeseen event. As the Human Life can be shortened by deceases or accidents, similarly or assets/property can be destroyed by natural calamities or any man-made act. Many a times these kind of activities do not occur for longer period of time, may be for decades, but the fact always remains the same that we are exposed to the risk of happening of any uncertain/unforeseen event. This are all risk cover under the General Insurance.

Although, its true, no one can see his/her future but at the same time it is also true that we can predict the future events in a reasonable manner and therefore we always try to avoid certain activities which may lead us to losses and wherever we are unable to avoid some kind of acts we try to protect ourselves from those events. Like for earthquakes we build houses strong enough to be unaffected from earthquake up to a certain limit. But what if the earthquake occurs with huge intensity that a whole city get destroyed in minutes. Fortunately these events do not occur frequently but the fact again remains the same that we are unable to avoid certain kind of losses that may occur any time in future.

Simplified Concept of Insurance

To cover up the damage occurred due to any foreseen or unforeseen event and mitigate the losses the mankind evolved a wonderful concept of Insurance. Since the occurrence of loss causing events are few in numbers the mechanism of Insurance ensures that the losses to be shared by all members of a certain group which is exposed to similar risk of occurrence of such loss causing event. This mechanism runs over a simple concept of society where we come together to form a group and this grouping make us feel protected and similarly while having the insurance all the risk bearers ensure that any loss occurring in future shall be borne by whole group despite of the fact that actual loss occurred to a very few members in that group.

So in this manner, Insurance is a mechanism which ensures that the unfortunate some, who suffered loss due to a certain event, get compensated and their loss be mitigated by large number of contributors who are exposed to similar kind of loss causing event ect.

Source From: http://insuranceblog.asia/insurance-an-introduction/