About 60% of Insurance Business is Slated to be with Listed Entities Post LIC IPO

On Saturday, 21 August 2021, the Treasury Deputy Secretary within the Finance Ministry, Amit Agarwal, said that 60% of the insurance businesses would be held with listed companies after the LIC IPO. Previously, in July, the Cabinet Committee on Economic Affairs had provided its in-principle approval for listing LIC on the stock exchanges.

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Post LIC IPO: A Quick Look into this Subject

During a recent event, Mr. Agarwal mentioned that India continues to grow amidst the current global challenges. He further added that India is continuing to develop as a rising financial system with a robust monetary structure that has developed enough to attain a matured scale.

The Additional Secretary also added that a need for this significant rise is different in various ways. For instance, the insurance sector has matured with a total of 69 insurers within the last two decades with the introduction of competition and regulation. On the other hand, the numbers for the same added up to only 8 during 2000.

Currently, a majority of such insurers have crossed initial breakeven phase. Furthermore, the entire insurance sector is growing rapidly compared to the economy as a whole. As a result, after the LIC IPO, about 60% of the insurance industry’s business will be listed companies.

Moreover, as of now, India has four listed life insurers and two non-life insurers. In addition, state-owned General Insurance Corporation of India also features on the bourses.

Additional Secretary Mr. Agarwal further added that actuarial professionals would play a key role in developing new solutions needed by India for its maturing insurance sector.

Wondering how?

Let us start by highlighting a few perceptual risks on account of an ongoing pandemic that he pointed out.

• Rising cases of catastrophic events and climate change concerns have raised significant awareness of environmental risks.
• Ways to carry out a business and undertake individual pursuits are constantly changing due to technological advancements.

Emergent Risk Areas – Should We Worry?

Mr. Amit Agarwal mentions that no historical data is available to back up these above-mentioned threats. He further states that various financial risks on account of these need to be managed.

However, there are newer solutions that can help in tackling such risk areas. Hence, by applying actuarial methods within traditional areas like insurance, there would be no space left to deal with these emergent risks as well.

Final Takeaway

A fertile foundation to assess such risks is readily available in the form of a variety of data. Actuaries can help India by cropping in new solutions and engaging actively in identifying new opportunities.

Furthermore, actuaries can help enhance risk management in the insurance sector by joining other sectors like finance, underwriting, or marketing.

Frequently asked questions

1. How much does the government plan to raise from the LIC IPO?

LIC IPO is an effort by the government to raise as much as Rs. 1.75 lakh crores through disinvestment in the current monetary year.

2. How does the insurance sector plan to manage the emergent risk areas?

Cultivating innovative approaches and expanding the application of actuarial methods within traditional areas like insurance are a few ways to manage the risks.

3. When will the LIC IPO hit the markets?

LIC IPO is planned to be underway in the third or fourth quarter of FY 2021-2022.