Promoters of seven private life insurers will have to wait if they want to exit their ventures after the Insurance Regulatory and Development Authority (Irda) decision to impose a minimum five-year of lock-in for the promoters of an insurance company to sell or transfer their stakes. The move will give confidence to the policyholders and investors.

These include Bharti AX-A Life Insurance, which started operation in December 2006, IDBI Fortis Life (M-arch 2008), Canara HSBC OBC Life insurance (June 2008), Aegon Religare (July 2008), DLF Pramerica (September 2008), Future Generali (April 2008) and Star Union Daiichi Life Insurance (January 2009). At present, there are 21 private life insurance firms in India.

Among non-life companies, Bharti AXA General Insurance is just one-year old. and it started operations in July 2008. Shriram General Insurance also sta-rted operation in July 2008.

Future Group's JV with Italy's Generali Group, Future Generali General Insurance, started operations in November 2007. Apollo DKV Health Insurance also started operation in the same month. Universal Sompo General Insurance came into being in Feburary 2008. Raheja QBE General Insurance Company started in April 2009.

The guidelines on corporate governance for insurance companies released recently said: “Irda prescribes a minimum lock-in period of five years for the promoters of the insurance company and no transfer of shares years from the date of certificate of commencement of business of an insurer of the promoters would be permitted within this period.”

S B Mathur, secretary general, Life Insurance Council said, “Insurance is a long-term business and the idea behind Irda's decision is to give confidence to policyholders and investors that the companies are here to stay. These guideline might cause problems to some of newer companies who are looking at exiting from this business.”

Kapil Mehta, chief executive officer, DLF Pramerica Life Insurance said, “Before granting license to insurers to begin operation, Irda evaluates financial stability and commitment of promoters. Now the regulator has prescribed minimum lock-in period. This is bound to alter the way investors look at insurance companies in a positive way.”

Mehta said the Indian promoters of DLF Pramerica, the DLF group, was not looking at exiting the insurance business in the near future. In fact, he pointed out that the company was going ahead with its plans chalked for the present financial year. The firm, which is in first year of operation, has recently infused capital and has plans to open more branches, he said.

Insurance industry players feel that the guidelines are important as many new firms started operation in the past two years. “It was like a rat-race. But life insurance is capital-intensive business. Many promoters who are not able to maintain the capital requirements, would want to exit and sell their stakes in the company. These guidelines are to prevent that from happening. Interest of policyholders is an important concern of Irda,” said a senior employee of a private insurance firm.