Norms on insurance IPOs by February-end: IRDA chief

The Insurance Regulatory and Development Authority (IRDA) will come out with guidelines for initial public offerings by insurance companies by the end of February, IRDA chairman J Hari Narayan told reporters on the sidelines of a conference organised by FICCI in New Delhi on Tuesday.

''We are awaiting the guidance note from the Institute of Actuaries. Once that comes, we will bring out the guidelines by February-end,'' Narayan said.

The insurance-sector regulator is also mulling the introduction of a cap on charges on traditional products, as they had done with unit-linked insurance products (ULIPs). Narayan said that IRDA will first study the impact of the cap on charges on ULIP products and then take a call on whether to extend the same to traditional products.

From 1 January this year, IRDA had capped the difference between gross and net yields for ULIPs of 10-year tenure or less at 300 basis points, and at 225 basis points for ULIPs with a tenure of more than 10 years. ''We will see after 6-7 months and then will decide how it can be done or whether it should be done,'' he said.

A CNBC-TV18 report says that industry players see little scope to cap charges (commission expenses and other administrative expenses) on traditional products, as the charges are already very low.

Narayan also highlighted the need for plain-vanilla insurance products that can be ''rolled out from slot machines'. However, he ruled out the introduction of derivative instruments till insurance companies made their reporting systems more robust.

There has been a suggestion from companies to allow plain vanilla derivative products to help manage the yield curve more easily. But unless companies adopt strict compartmentalisation of people who make investment decisions, who report asset-liability mismatches and who manage accounting, it would not be prudent to allow these instruments, he said.