Govt may go slow on GIC ordinance

NOV 5: Government may go slow on the proposed ordinance to delink General Insurance Corporation (GIC) and its four subsidiaries in the fac...

NOV 5: Government may go slow on the proposed ordinance to delink General Insurance Corporation (GIC) and its four subsidiaries in the face of opposition from the employees unions.

The Insurance Regulatory and Development Authority (IRDA) had set November 16 as the date for the delinking. Government was preparing for an ordinance as legislation could not be passed before November 20 because the winter session of Parliament was scheduled to start only then.

"We can’t observe the deadline by November 16 (for the GIC demerger)," Finance Minister Yashwant Sinha told PTI on the sidelines of a seminar on Saturday.

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But he hastened to add "we will see" implying government could bring in the ordinance anytime from now. Official sources, however, said the government was ready with the ordinance and it has been vetted by the Law Ministry.

When contacted, IRDA chairman N Rangachary said "sooner the ordinance is passed and GIC is delinked, faster would be the process of converting it into the Indian reinsurer."

This was necessary as the regulator has started giving licences to new private players for opening shops by January 2000.

There were dissent from a section of insurance employees over the demerger of four subsidiaries — National Insurance, Oriental Insurance, New India Insurance and United India Assurance — from GIC, and the employees were planning to go on a countrywide strike.

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Sinha evaded queries about equity hike by the Life Insurance Corporation (LIC), which missed the IRDA’s deadline of October 18, saying "I can’t comment on this issue now."

GIC has, however, met the deadline and raised its capital base to Rs 200 crore and that of its subsidiaries to Rs 100 crore each from the previous Rs 40 crore.

Rangachary said the next tranche of insurance licences to new domestic companies was expected in a few weeks from now.

"We are going through the applications, the time of granting the licence would depend on how fast the applicants comply with requirements," he said.

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So far IRDA has given licences to HDFC-Standard Life, and non-life companies of Reliances and Royal Sundaram Sun Alliance while ICICI-Prudential Life, IFFCO-Tokio Marine Fire and Max-New York Life obtained "in-principle" clearances.

In case of ICICI-Prudential, Rangachary said IRDA has asked the financial power house to get clearance from Reserve Bank of India (RBI).

The insurance regulator is currently processing applications of companies including Reliance Life Insurance, Tata-AIG (both life and non-life), Kotak-Old Mutual, Bajaj Auto (non-life), Royal-Sundaram Sun Alliance Life.