INDIA'S SBI GENERAL, MAX BUPA EXEMPTED FROM MGMT EXPENSES CAP

Indian insurance regulator Irda has exempted SBI General Insurance and Max Bupa from following its guidelines capping management expenses at 23 per cent of gross premium collections during their first five years in business.

"... The companies -- SBI General Insurance Company and Max Bupa Health Insurance Company -- shall be deemed to be not in violation of (expense management) in the first five years of their operations, even if they exceed the prescribed limits," the Insurance Regulatory and Development Authority (Irda) said in an order.

The management expenses of insurance companies include operating costs such as wages and commissions, business acquisition costs and expenses on marketing and advertising. At present, insurance companies are required to cap their management expenses at 23 per cent of gross premium collections.

As per the existing rules, any company that fails to keep its management expenses below the threshold level is required to set aside a corresponding amount to capital to ensure that solvency norms are not violated.

It further said that individual insurer would be exempted from adherence to management expenses norms during the first partial financial year in which it commenced operations, over-and-above the five-year period.

Since both SBI General Insurance and Max Bupa started operations in the last fiscal year, they will be exempt from the requirement of setting aside more capital in case management expenses cross the threshold limit of 23 per cent of gross premium collections during the 2010-11 to 2014-15 period, in addition to a partial period of the last fiscal, as per Irda's directive.