The Insurance Regulatory and Development Authority of India (Irdai) has placed a consultation paper in the public domain proposing amendments to the Insurance Regulatory and Development Authority of India (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024. According to Informist, these comprehensive changes aim to streamline insurer registrations, clarify promoter and SPV definitions, reduce regulatory costs and facilitate capital infusion while creating a more transparent, growth-oriented and globally aligned insurance sector. The proposed amendments come in the backdrop of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which among other provisions permitted 100% foreign direct investment (FDI). As per Business Standard, these amendments are part of efforts to create a more transparent, growth-oriented and globally aligned insurance sector.
In a significant development, Irdai has proposed permitting insurers to invest up to 5% of shareholders' funds available beyond the solvency margin in private limited companies, in line with provisions introduced under the Sabka Bima Sabki Raksha (SBSR) Act. According to Business Standard, under the proposed norms, insurers may invest in private limited companies with a minimum net worth of ₹25 crore and a reported net profit in at least two of the preceding three financial years. The regulator has specified that insurers may invest not more than 5% of shareholders' funds available beyond the solvency margin in these eligible private companies. However, Irdai has barred investments in private limited companies belonging to an insurer's promoter group and proposed that insurers should not invest more than 5% of their investment assets in any company or body corporate owned or controlled by the promoter. Further, aggregate investments across all promoter-group companies should not exceed 5% of the insurer's investment assets.
The regulator has proposed allowing insurance companies to merge with their non-operative holding companies (NOHCs) as part of the new proposed registration and capital structure regulations. According to Informist, the amendments specify that the transferor company carrying on non-insurance business must be the non-operative holding company of the insurer with which it proposes to amalgamate. The transferor company should hold more than 50% of the equity capital of the transferee insurer and should not have any business operations. As reported by Business Standard, the policyholders' fund of the transferee insurer cannot be used, at any point of time, to meet any liabilities, claims or obligations arising out of the amalgamation. The board of the insurer will satisfy itself that such amalgamation will not adversely impact the interests of the policyholders of the transferee insurer, and the transferee insurer shall demonstrate that its solvency, after amalgamation, will remain above the control level. The Irdai-mandated solvency ratio is 150%.
Irdai has proposed easing several ownership and investment norms as part of the comprehensive regulatory changes. According to Informist, the amendments are designed to reduce barriers for investors seeking to enter the insurance sector and create a more flexible regulatory environment for ownership structures. The changes relate to eligibility criteria for Indian as well as foreign promoters, foreign investment safeguards, special purpose vehicles (SPVs), approval for transfer of shares, and forms and application procedures. Under existing regulations, SPVs are permitted to act as promoters, but the regulator has now proposed that applicants provide justification for adopting an SPV structure and has suggested expanding the definition of eligible SPVs to include foreign-incorporated entities based in jurisdictions compliant with the Financial Action Task Force (FATF) framework. As reported by Business Standard, Irdai has also issued clarifications on approval requirements for renunciation in rights issues, stating that approval would be required for every five percentage-point increase in shareholding.
As part of the proposed amendments, rationalization of fees payable by insurers is another significant change proposed by Irdai. According to Informist, the processing fee for amalgamation applications will be reduced from the existing ₹50 lakh to a flat fee of ₹1 million per transacting party, while the processing fee for transfer of shares applications involving more than 50% of an insurer's equity will be reduced from ₹50 lakh to ₹1 million. Under the current guidelines for amalgamation, an insurer is expected to pay a fee at the rate of one-tenth of gross premium, subject to a minimum of ₹50 lakh and a maximum of ₹5 crore. As reported by Business Standard, it is proposed to reduce the fee to a fixed amount of ₹10 lakh, payable by each of the transacting parties. To facilitate liquidity management, Irdai has also proposed permitting life insurers to undertake repo transactions and securities lending in government securities. The regulator has also proposed introduction of processing fees for applications seeking a no-objection certificate and restructuring of provisions governing insurer names.
