Insurers reluctant to launch IPOs amid RBC implementation and stake dilution concerns

Initial Public Offering

Despite the Insurance Regulatory and Development Authority of India (IRDAI) intensifying its push for large insurance companies to list, insurance companies are showing little enthusiasm for it, with many holding off on IPO plans, according to sources.

“The reality is that going public would require us to dilute our stake, which is not a favourable option at this stage. Major stakeholders in Indian insurance companies hold a significant share in their respective businesses,” a source said.

As a result, insurance companies have collectively requested the regulator to grant more time before considering an IPO, he said.

“While we were asked to submit a framework for a potential listing, we complied with that request,” he said, adding that listing the company isn't on the cards in the medium term.

RBC uncertainty

Besides, with the implementation of risk-based capital (RBC) round the corner, the exact capital requirements for the business remain unclear. “We will only begin considering a public listing once this uncertainty is resolved and the situation stabilises," he added.

In August 2024, the IRDAI introduced the RBC framework, transitioning from the existing solvency margin system.

Under this approach, insurers will be required to maintain capital based on the level of risk they undertake, rather than following a fixed solvency ratio. "Till we assess what would the capital requirement be under RBC and get our promoters willingness to back us, should there be a call for capital, we would not consider listing," said a CEO of a life insurance company who didn't want to be named.