IRDAI notifies amendment in Insurance Regulations to make Indian Insurance Sector globally attractive

In view of various representations and requests received from various stakeholders, the Insurance Regulatory and Development Authority of India “IRDAI” vide its press note dated 25.11.2022 has notified
amendments in existing Insurance Regulations. These amendments aim at promoting ease of doing business and simplify the process of setting up an insurance company in India, with a view to promote
Insurance coverage amongst all citizens / business houses and to make the Indian Insurance Sector globally attractive.

Key highlights related to the Amendment:

• Subsidiary companies are also allowed to be promotors of insurance companies.
• Investment up to 25% of the paid-up capital by single investor (50% for all investors collectively) will now be treated as ‘investor” and investments over and above that will only be treated as promoter”. [Earlier the threshold was 10% for individual investor and 25% for all investors collectively.]
• A new provision has been introduced to allow the promoters to dilute their stake up to 26%, subject to condition that the insurer has satisfactory solvency record for preceding 5 years and is listed entity.
• Lock-in period of investments for investors and promotors has been stipulated on the basis of age of insurer.
• Increase in tie-up limits for intermediaries: Maximum number of tie ups for Corporate Agents (CA) and Insurance Marketing Firms (IMF) have been increased. Now, a CA can tie up with 9 insurers (earlier 3 insurers) and IMF can tie up with 6 insurers (earlier 2 insurers) in each line of business.
• Enhanced limits for capital contributions: Limits for raising capital through subordinated
• debt/preference shares have also been increased from 25% to 50% of paid-up capital & premium, subject to 50% of Net worth of company.
• Enhanced solvency norms for Crop Insurance: The period for considering State/Central Government premium dues for calculation of solvency position has been increased from 180 days to 365 days. The solvency factors related to crop insurance are also reduced to 0.50 from 0.70.

Implication: This amendment will certainly impact the entire insurance industry and will certainly build a forward-looking regulatory architecture to foster a conducive and competitive environment leading to wider choice, accessibility and affordability to policyholders to pave the way for the mission “Insurance for
All by 2047” as nurtured by the IRDAI.

Syed Aman, Article Assistant, Audit, SW India

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