Page 10 - Insurance Times December 2021

provisions of the Master Direction on fiscal and we have set strict timelines. mating the embedded value of the life
"Prior approval for acquisition of shares The DRHP would be filed by Novem- insurer and once that is done the minis-
or voting rights in private sector banks ber," the official told PTI. terial panel on disinvestment will de-
dated November 19, 2015 and Master cide on the government stake that will
The government last month appointed
Direction on 'Ownership in private sec- be divested through IPO, the official
10 merchant bankers, including
tor banks' dated May 12, 2016, provi- Goldman Sachs (India) Securities Pvt said.
sions of the applicable regulations is-
Ltd, Citigroup Global Markets India Pvt The government has appointed actu-
sued by the Securities and Exchange
Ltd and Nomura Financial Advisory and arial firm Milliman Advisors LLP India to
Board of India, provisions of the Foreign Securities (India) Pvt Ltd to manage the compute the embedded value of LIC
Exchange Management Act, 1999 and ahead of the initial public offering.
mega initial public offering of country's
any other guidelines/regulations and
largest insurer LIC. The government is also mulling allow-
statutes, as applicable. The approval is
Other selected bankers include SBI Capi- ing foreign investors to pick up stakes in
valid for a period of one year," said the
tal Market Ltd, JM Financial Ltd, Axis country's largest insurer LIC. As per Sebi
notice.
Capital Ltd, BofA Securities, J P Morgan rules, foreign portfolio investors (FPIs)
The RBI norms mandate that every per- India Pvt Ltd, ICICI Securities Ltd, and are permitted to buy shares in a public
son or an entity who intends to make Kotak Mahindra Capital Co Ltd. offer. However, since the LIC Act has no
an acquisition in private banks of more provision for foreign investments, there
Once the draft red herring prospectus
than 5% stake, has to take prior ap- is a need to align the proposed LIC IPO
(DRHP) is filed, merchant bankers will
proval from the central bank. with Sebi norms regarding foreign in-
hold global and domestic road shows
vestor participation.
for investors by January, the official
LIC to file draft IPO papers said. The Cabinet Committee on Economic
Affairs had in July cleared the initial pub-
with Sebi next month Cyril Amarchand Mangaldas has been lic offering proposal of Life Insurance
Country's largest insurer LIC is likely to appointed as legal advisor for the IPO. Corp of India.
file draft papers with Sebi by Novem- The government is aiming to list the in- The listing of LIC will be crucial for the
ber for the largest IPO in country's his- surance behemoth within the current government in meeting its disinvest-
tory, a finance ministry official has said. financial year ending March. ment target of Rs 1.75 lakh crore for
"We target to bring the IPO within this The ministry is in the process of esti- 2021-22 (April-March). T

India needs national disaster pool to hedge natural disaster risks: SBI

With the incidents and severity of natural calamities rising by the year, a report has called for creating a national
disaster pool, as the country is amongst the most disaster-prone countries in the world. India ranks third, after the US
and China in the number of natural disasters since 1900, with 756 natural disasters such as landslides, storms, earth-
quakes, floods, droughts etc. During 1900-2000 there were 402 disasters and 354 during 2001-21.
Since 2001, a total of 100 crore people have been impacted and nearly 83,000 lost lives due to these disasters. If the
losses are adjusted with current prices, the losses come out to a staggering Rs 13 lakh crore or 6 per cent of the GDP,
State Bank of India (SBI) said in a note. Between 1991 and 2021, only around 8 per cent of the total losses are cov-
ered in the country, so, there is around 92 per cent protection gap during this period.
Early intervention is needed to close the protection gap, which are in all lines of insurance and the only way out is a
public-private solution by creating a national disaster pool to hedge natural disaster risks, Soumya Kanti Ghosh, the
group chief economic adviser at SBI said in the note. Total economic losses from the 2020 floods were USD 7.5 billion
or Rs 52,500 crore but insurance available was only 11 per cent, he said in the report, adding that if the government
would have insured it, then the premium for the sum assurance of Rs 60,000 crore would have been only Rs 13,000-
15,000 crore. Apart from human losses, there is huge economic loss due to natural disasters.
"Since 1900, we have suffered an economic loss of USD 144 billion (where the loss is reported) with the largest loss
from floods (USD 86.8 billion) followed by storms (USD 44.7 billion). If these losses are adjusted with current prices the
losses come out to be around USD 87 billion or Rs 13 lakh crore," he said.

10 The Insurance Times, December 2021