Life insurance companies planning to tap the equity market through initial public offerings (IPOs) would have to secure a "written" approval from the Insurance Regulatory and Development Authority (Irda), before applying to market regulator Securities and Exchange Board of India (Sebi).

In the final guidelines on IPO norms for life insurance companies issued on Thursday, the insurance regulator stated it would also have a say on the extent of dilution by promoters.

"No insurance company shall approach Sebi for a public issue, or any subsequent issue, without a specific previous written approval of the authority. While according its approval, the authority may prescribe the extent to which promoters shall dilute their respective shareholding, the maximum subscription which could be allotted to any class of foreign investors," Irda said.

To list the company, the embedded value of the insurer must be at least twice the paid-up equity capital. An embedded value report should be prepared by an independent actuary expert, and should be substantiated by a peer review by another independent actuary. "It shall be prepared in the manner prescribed by the Actuarial Practice Standard, issued by the Institute of Actuaries in India," Irda said.

While any life insurer with operational for more than 10 years may apply for an IPO, the regulator has scrapped the three-year profitability clause from eligibility norms. To secure an approval, an insurer should have a satisfactory regulatory record, maintain the prescribed regulatory solvency margin at the end of the preceding six quarters, and comply with the disclosures requirements and Irda's corporate governance guidelines.

"The authority reserves the right not to accord its prior approval if, in its opinion, the applicant company is not fit to tap the markets through a public issue, or where it may be detrimental to the interests of policyholders, or it may not be in the interest of the insurance business in the country," Irda said.

"We welcome the guidelines announced by Irda. This is an important, enabling step for life insurers to plan their capital-raising strategies. Companies would, however, plan their individual strategies, depending on various factors," said Puneet Nanda, executive director, ICICI Prudential Life Insurance Company.