Registration of Indian Insurers
The Insurance Regulatory and Development
Authority of India (IRDAI) was established in 2000 as a statutory body to
regulate and develop the insurance industry. It introduced a regime for the
registration of insurers, enabling Indian promoters or foreign promoters in
joint ventures with Indian entities to establish insurance companies.
1. How does obtaining registration from
IRDAI help?
Securing
registration from IRDAI is mandatory when an entity ventures into the insurance
industry in India, in accordance with the Insurance Act, 1938. By obtaining the
registration, the entity not only ensures that it is following the legal
framework but also demonstrates its commitment to running an insurance business
that adheres to the applicable regulatory framework.
2. Who can set up an Indian insurance
company?
Indian promoters
or foreign promoters, in joint venture with Indian promoters/investors, can set
up an Indian insurance or reinsurance company
3. What are the permissible legal forms in
which applicant may be incorporated?
An applicant for
seeking registration may be:
i.
A public company
registered and incorporated under the Companies Act, 2013; or
ii.
A co-operative
society.
4. Is there any officer designated by IRDAI
to facilitate applicants in the course of application?
Yes,
IRDAI has created a Registration Cell as a single point of contact to
facilitate applicants throughout the registration process. The contact details
of Registration Cell are as under:
|
Designation
|
Contact
Number
|
Email
id
|
|
General
Manager, Registration Cell
|
+914020204874
|
registrations-cell@irdai.gov.in
|
|
Assistant
General Manager
|
+914020204128
|
In addition to the above, the IRDAI
shall designate one or more of its officers to act as facilitation officer(s) for
each of the application. The IRDAI shall communicate details of the facilitation
officer(s) after issuance of No-objection Certificate.
5. What are the permissible class of
business for which registration may be sought and what is the minimum capital
required to set up an Indian insurance company in each of the said class of
business?
|
Permissible
Class of Business
|
Minimum
Paid-up Equity Capital Required
|
|
Life
insurance business
|
₹
100 crore
|
|
General
insurance business
|
₹
100 crore
|
|
Health
insurance business exclusively
|
₹
100 crore
|
|
Reinsurance
business exclusively
|
₹
200 crore
|
6. What is the process for registration of
an Indian insurance company?
An applicant for registration as
insurance company shall go through the following stages:
|
Stage
|
At
what point of time
|
How
to Apply / Submit
|
|
NOC
|
Before
incorporation of company
|
Apply
at portal https://noc.irdai.gov.in
|
|
R1
|
After
the company is incorporated
|
Apply
for issuance of form R1 bearing unique number to Registration Cell.
Submit
duly filled form IRDAI/R1 to Registration Cell.
[The
form may be downloaded from Master Circular on Registration, Capital
Structure, Transfer of Shares and Amalgamation of Insurers, 2024 Click
Here]
|
|
R2
|
After
the grant of R1 approval
|
Form
R2 will be issued by IRDAI to the applicant along with R1 approval.
Submit
duly filled form IRDAI/R2 to Registration Cell.
[The
form may be downloaded from Master Circular on Registration, Capital
Structure, Transfer of Shares and Amalgamation of Insurers, 2024 Click
Here]
|
|
R3
|
After
the grant of R2 approval
|
Form
R3 i.e. Certificate of Registration shall be issued by IRDAI to the applicant
after the R2 approval is granted by the Authority.
|
7. What are the documents required to be
submitted along with application?
All the forms, documents, information,
etc. may be submitted to Registration Cell. The details of documents required
to be submitted at each of the stage is as under:
8. What is the validity of NOC, form R1 and
R1 approval issued by IRDAI?
|
Validity
of
|
As
per following Regulation of Registration Regulations, 2024
|
|
NOC
Issued by IRDAI
|
6(1)(c)
|
|
Form
R1
|
6(2)(a)
|
|
R1
approval
|
6(2)(e)
|
9. What are the various processing fee
required to be paid to IRDAI at each stage of registration?
The applicant is
required to pay non-refundable processing fee at various stages of registration
as per the applicable Regulations as under:
|
Fee
payable at the time of
|
Fee
Amount*
|
|
Application
for issuance of NOC
|
Nil
|
|
Application
for issuance of Form IRDAI/R1
|
Nil
|
|
Submission
of Form IRDAI/R1 to IRDAI
|
₹
5 lakh
|
|
Submission
of Form IRDAI/R2 to IRDAI
|
₹
5 lakh
|
|
For
issuance of Form IRDAI/R3 or Certificate of Registration
|
Nil
|
*Taxes, as
may be applicable, shall be paid on the said fee.
10. How to pay non-refundable processing
fee?
The applicant
shall make payment of non-refundable processing fee, through any recognised
electronic mode as per following details:
i.
Bank Account No.
860120100001938
ii.
IFSC Code:
BKID0008601
iii.
Name of Recipient:
IRDA
iv.
Bank Name: Bank of
India
v.
Branch: Basheerbagh,
Hyderabad
After making the payment, a confirmation
along with payment details shall be sent to Registration Cell.
11. Where can the status of application be
checked?
At any stage,
the applicant may check the status of application from the Registration Cell.
12. Can registration application be
withdrawn by applicant?
The applicant may request for
withdrawal of the application at any stage. IRDAI, at its discretion, may approve
request of the applicant to withdraw the application.
13. What is No Objection Certificate (NOC)?
No Objection
Certificate (NOC) is a certificate issued to an applicant by the Authority on
request. NOC is issued for the sole purpose of enabling the applicant to apply
for incorporation of the proposed company with word “Insurance” in its name
with Registrar of Companies (RoC).
14. How does one apply for NOC?
An application
for NOC is to be made online through the NOC portal https://noc.irdai.gov.in Alternatively, the said link can also be
accessed at https://irdai.gov.in expand the tab “E-SERVICES” and click on “New
Insurer Registration Corner”.
In case any issue is faced in applying for issuance of NOC, the applicants may
reach out to the Registration Cell.
15. What is the maximum permissible foreign
investment in an Indian insurance company?
The maximum
permissible foreign investment in an Indian insurance company is 74%.
16. What is manner of calculating foreign
equity capital held by foreign investor?
Regulation 19 of
the Registration Regulations provides the manner of computation of foreign
equity capital held by foreign investors. The said regulation can be accessed
at https://irdai.gov.in/web/guest/document-detail?documentId=4591837 (page 40 of the Regulations).
17. Are there any restrictions/provisions
related to FDI from land border countries?
In terms of
Press Note 3 of 2020 of DPIIT, Ministry of Commerce and Industry, an entity of
a country, which shares land border with India or where the beneficial owner of
an investment into India is situated in or is a citizen of any such country,
can invest only under the Government route.
18. What is the procedure to obtain approval
of Government of India, if Press Note 3 of 2020 is applicable?
For seeking
approval of Government of India, application may be filed on Foreign Investment
Facilitation Portal (FIFP) (at https://fifp.gov.in) and along with required details such
as proposal summary, applicant details, investee and investor related details
etc. The detailed list of documents and the process to be followed can be
further understood from the SOP for Processing FDI Proposals available on the
website of FIFP and can be accessed at https://fifp.gov.in/Forms/SOP.pdf.
19. Is there any requirement with regard to
board or Key Management Personnel (KMP) structure for an applicant having
foreign investment?
As per Rule 4 of
Indian Insurance Companies (Foreign Investment) Rules, 2015, “In an Indian
insurance company having foreign investment:
i.
A majority of its
directors,
ii.
A majority of its
KMPs, and
iii.
At least one among
the chairperson of its Board, its managing director and its Chief Executive
Officer, shall be Resident Indian Citizens.”
Further, as per Rule 4A of
Indian Insurance Companies (Foreign Investment) Rules, 2015, “An Indian
insurance company having foreign investment exceeding 49% shall comply with
following -
a. for a financial year for which dividend
is paid on equity shares and for which at any time the solvency margin is less
than 1.2 times the control level of solvency, not less than fifty percent of
the net profit for the financial year shall be retained in general reserve; and
b. Not less than fifty per cent of its
directors shall be independent directors, unless the chairperson of its Board
is an independent director, in which case at least one-third of its Board shall
comprise of independent directors.”
In addition, the Board and Governance
structure shall be in compliant with the IRDAI (Corporate Governance for
Insurers) Regulations, 2024 https://irdai.gov.in/web/guest/document-detail?documentId=4590027
Illustrative financial statement snapshots
of insurers are available here
[1]
[2]
[3] for reference. It may be noted that these are just
illustrations and must not be quoted for any applications filed with the
Authority. The list is only indicative and not exhaustive.
20. Who can be an Indian promoter?
The entities as
specified in Regulation 3(1)(l) of Registration Regulations may become Indian
Promoter. The Regulation can be accessed at https://irdai.gov.in/web/guest/document-detail?documentId=4591837.
21. Can PE Funds be shareholders of
insurance companies?
Yes. PE Funds and AIFs can also invest
in the insurance companies. In order to invest in the capacity of promoter, the
PE Funds are required to meet the eligibility criteria, as specified in
Regulation 18 of Registration Regulations.
22. What are the requirements to be complied
with in case the promoter of any applicant is a Special Purpose Vehicle?
In case the
promoter of the applicant is a Special Purpose Vehicle (SPV), the requirement
of Regulation 10 of Registration Regulation shall be complied with.
23. Can an insurer or an SPV, that is
promoter of the insurer, issue convertible preference shares or debentures?
Insurer is not permitted to
issue any kind of convertible instruments, irrespective of the nomenclature of
the instrument. The SPV that is promoter of the insurer shall not issue any
convertible instruments of any kind.
24. Can the shares of applicant company or
the SPV (in case the SPV is the promoter of the applicant) be issued to the
shareholders at the security premium?
The shares of
the applicant company or the SPV shall be issued to its shareholders only at
the face value, until the commencement of business. In other words, there
should not be any security premium, by whatever name called, involved in the
issue price to the shareholders of the applicant company or the SPV. Post
commencement of business, the IRDAI may permit the security premium.
25. What is the maximum holding of an
insurer that can be acquired in the capacity of “investor”?
a. Holding of any investor in an
insurance company shall be less than 25% of the paid up equity share capital of
such insurance company;
b. All investors jointly shall
hold less than 50% of the paid up equity share capital of the insurance
company. However, in case of an insurance company having its shares listed on
the stock exchange(s) in India, the holding of investors may be more than 50%
of the equity capital of the insurer but it shall not exceed 74% of the equity
capital of the insurer.
26. Can a shareholder, in the capacity of
“Investor”, nominate director on the Board of the insurer in which investment
has been made by the said “Investor”?
Yes,
the shareholder, which has invested in any insurance company in the capacity of
“investor”, may nominate one director on the board of the insurer if its
investment exceeds 10 percent of the paid up capital of the respective insurer,
provided the said “investor” has not nominated director on the board of any
other insurer in the same class of business.
27. Is there any lock-in on the shares of
insurance company acquired by the investors and promoters?
The equity
shares held in the insurer by the promoter(s) and investor(s) shall be subject
to lock-in period as per Regulation 8 of Registration Regulations.
28. At what stage of the registration
process, required capital should be infused by the shareholders of the
applicant?
The applicant is required to ensure
capital infusion from the shareholders immediately prior to consideration of
the R2 application by the Authority. Further, the capital may be infused in the
form of share application money and in case the approval is granted by the
Authority, the same may be converted into the paid-up equity capital by
allotment of shares. In case, the R2 application is rejected by the Authority,
the applicant may take such call with respect to the share application money as
is considered appropriate.
29. Whether further capital infusion is
required post setting up of insurance company? If yes, at what periodicity?
Subsequent capital infusion in the
insurer, post grant of Certificate of Registration by IRDAI, will depend upon
the financial and solvency position of the insurer. The insurers are required
to maintain a control level solvency ratio of 1.50 times. The shareholders of
the insurer are required to infuse the capital in the insurer to ensure that:
i.
Control level of
solvency is maintained at all times.
ii.
To meet the financial
and liquidity requirements of the insurer.
iii.
To meet the growth
aspirations of the insurer.
30. What is the time limit for commencement
of business after grant of CoR to the applicant?
An applicant
granted the Certificate of Registration is encouraged to commence the business
operations at the earliest possible. It shall commence insurance business
within 12 months of the date of grant of Certificate of Registration.
31. What are the important/major relevant
regulations, rules and guidelines that the Applicant may refer at the time of
making application?
IRDAI has approved nine consolidated
regulations covering various areas concerning insurance products, policyholder
protection, rural/social responsibilities, e-insurance, registration,
actuarial, finance, investments and governance after comprehensive consultations,
replacing 37 previous regulations with seven streamlined ones and two new ones,
fostering clarity, innovation and sustainable insurance sector growth.
The Act and major regulations applicable
to an applicant are as follows:
|
S.
No.
|
Particulars
|
Details
Available in the document
|
URL
|
|
1
|
Insurance
Act, 1938
|
Provisions
related to Capital Requirements, Setting up of insurance company etc.
|
https://irdai.gov.in/document-detail?documentId=977536
|
|
2
|
IRDAI
(Registration, Capital Structure, Transfer of Shares and Amalgamation of
Insurers) Regulations, 2024
|
Process
of seeking Registration, promoter, registration of insurers, transfer of shareholding,
capital structure, amalgamation of insurers, and listing of shares on stock
exchanges etc.
|
https://irdai.gov.in/web/guest/document-detail?documentId=4591837
|
|
3
|
Master
Circular on Registration, Capital Structure, Transfer of Shares and
Amalgamation of Insurers, 2024
|
Formats
of various forms to be filed with IRDAI
|
https://irdai.gov.in/web/guest/document-detail?documentId=4885776
|
|
4
|
IRDAI
(Protection of Policyholder's Interests, operations and allied matters of
insurers) Regulations, 2024
|
Ensuring
fair treatment of prospects during solicitation and sale of insurance
policies and protecting the interests of
policyholders
throughout their engagement with insurers and distribution channels.
|
https://irdai.gov.in/web/guest/document-detail?documentId=4590885
|
|
5
|
IRDAI
(Rural, social sector and Motor third party obligations) Regulations, 2024
|
Compliance
and measurement of these
statutory
obligations.
|
https://irdai.gov.in/web/guest/document-detail?documentId=4592224
|
|
6
|
IRDAI
(Insurance Products) Regulations, 2024
|
Product
design and pricing, including strengthening of the principles governing
guaranteed surrender
value
& special surrender value along with disclosures thereof.
|
https://irdai.gov.in/web/guest/document-detail?documentId=4590475
|
|
7
|
IRDAI
(Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024
|
Single
framework focused on enhancing the efficiency and responsiveness of insurers'
actuarial, finance, and investment
functions.
|
https://irdai.gov.in/web/guest/document-detail?documentId=4589093
|
|
8
|
IRDAI
(Corporate Governance for Insurers) Regulations, 2024
|
Prioritizes
meeting the expectations of all stakeholders, especially policyholders, while
ensuring the adoption of sound and prudent governance principles and
practices.
|
https://irdai.gov.in/web/guest/document-detail?documentId=4590027
|
|
9
|
IRDAI
(EOM including Commission) Regulations,2024
|
Provides
regulatory framework around expenses of management and commission.
|
https://irdai.gov.in/document-detail?documentId=4359902
|
|
10
|
IRDAI
(Bima Sugam- Insurance Electronic Marketplace) Regulations, 2024
|
Provides
regulatory framework around Bima Sugam.
|
https://irdai.gov.in/document-detail?documentId=4583640
|
In addition to
the above, the various Regulations, Guidelines, Circulars etc applicable on
insurance companies in India can be accessed at https://irdai.gov.in/ under “Legal” tab.
32. What are the various initiatives taken
by IRDAI for ease of investment in insurance sector?
To facilitate a more streamlined process
for capital mobilization, the IRDAI, through its notification of Registration
Regulations, has implemented several key changes, such as:
i.
Eliminating
mandatory SPV requirement:
The IRDAI has removed the compulsory prerequisite for Special Purpose Vehicles
(SPVs) when Private Equity Funds seek to invest in insurance companies as
promoters.
ii.
Private Equity
Funds as promoters with eligibility criteria: Private Equity Funds are now permitted to assume the role
of promoters, contingent upon their compliance with the specific eligibility
criteria outlined in Regulation 18 of the Registration Regulations.
iii.
Increased investment
limit for investors:
The limit for investment in the capacity of an investor has been augmented from
10% to 25%, affording greater flexibility to potential investors.
iv.
Inclusion of
Subsidiary Companies as Indian Promoters: Notably, subsidiary companies are now eligible to act as
Indian Promoters, provided they meet the specified eligibility criteria as
delineated in Regulation 3(1)(l)(i) of the Registration Regulations.
v.
Dilution by promoters
in case of listed insurers:
Promoters are now allowed to bring down their stake to 26% in case the insurer
is listed on the stock exchange(s).
vi.
Reduction in
lock-in period: IRDAI
has introduced a progressive tapered lock-in period mechanism in which lock-in
period reduces as the insurers gains maturity and increases its foothold in the
market over period of time. IRDAI has recently removed the lock-in period
entirely for investors of insurers operating for 15 years or more since their
registration. The tapered lock-in period decreases restrictions on secondary
sale of transfers while attract more capital in the insurers due to increased investor
confidence and avenues of greater liquidity for investors.
33. What are the expectations with regard to
shareholding pattern and capital structure?
Applicants are encouraged to positively
address the considerations related to shareholding patterns and capital
structure as below. The list in only indicative.
i.
Financially strong
shareholders: The IRDAI
envisions applicants to have shareholders with robust financial standing. These
shareholders should not only be capable of providing initial capital but also
demonstrate a commitment to injecting future capital when necessary. Moreover,
they should meet the "fit and proper" criteria, affirming their
suitability for participation in the insurance sector.
ii.
Shares issued at
Face Value: The shares
issued or intended to be issued to all shareholders should be at their face
value. This means that shares are not proposed to be issued with a security
premium during the registration phase.
iii.
Proportional capital
infusion: Shareholders
are expected to infuse capital in proportion to their respective holdings in
the insurer. This ensures that each shareholder contributes funds commensurate
with their ownership stake.
iv.
Commitment to
Long-Term Investment:
Shareholders should demonstrate a commitment to remain invested in the
insurance sector, particularly during the initial phase of stability and growth
for the insurer. This commitment is crucial for fostering stability and
facilitating the insurer's development.
By adhering to these expectations, prospective
applicants can align themselves with the IRDAI's vision for a robust and
sustainable shareholding pattern and capital structure within the insurance
industry.
34. What are the expectations from the
promoter(s) of the applicant?
Expectations from the promoter of an
insurance company in India are multifaceted, as they play a pivotal role in
shaping and sustaining the company's operations and integrity. Here are some
key expectations:
a. Financial strength: Promoters should possess strong
financial capabilities to support the insurance company. This includes not only
the initial capital infusion but also the ability to provide additional capital
as needed to ensure the insurer's financial stability and solvency.
b. Commitment to the Insurance Sector: Promoters are expected to demonstrate
a long-term commitment to the insurance sector. This entails a willingness to
stay invested in the company during its initial phases of establishment and
growth, contributing to the stability of the insurance business.
c. Fit and Proper criteria: Promoters should meet the "fit
and proper" criteria set forth by the regulatory authorities,
demonstrating their suitability and integrity for involvement in the insurance
industry.
d. Transparency and Compliance: Promoters should adhere to strict
transparency and compliance standards. This includes adhering to all regulatory
requirements, providing accurate and timely information, and cooperating with
regulatory authorities during inspections and audits.
e. Ethical business conduct: Promoters are expected to uphold high
ethical standards in their business conduct. They should avoid conflicts of
interest and ensure fair treatment of policyholders and other stakeholders.
f. Fostering innovation: Encouraging innovation in insurance
products and services is crucial. Promoters should support and facilitate the
development of new and innovative insurance offerings, aligning with evolving
customer needs and market trends.
g. Corporate Governance: Promoters should ensure robust
corporate governance practices within the insurer. This involves appointing
qualified and independent directors, establishing strong board committees, and
fostering a culture of accountability and transparency.
h. Risk Management: Promoters should actively participate
in and contribute to the insurer's risk management processes. They should be
aware of the risks involved in the insurance business and support strategies to
mitigate them.
i. Customer focus: Promoters should prioritize the
interests of policyholders and customers. This includes providing competitive
and customer-centric insurance products, as well as efficient claims settlement
processes.
j. Compliance with Regulations: Promoters should adapt to changes in
insurance regulations and guidelines, ensuring that the company remains in
compliance with evolving requirements.
Overall, the expectations
from the promoter of an insurance company are aimed at safeguarding the
interests of policyholders and maintaining the stability and growth of the
insurance industry.
35. Does IRDAI facilitate product innovation?
Indeed, the
IRDAI has undertaken several initiatives to foster greater flexibility and
encourage innovation in product development within the insurance industry. Here
are some of the key initiatives:
a. Transition from ‘File and Use’ to ‘Use
and File’ Framework:
The majority of insurance products now operate under the ‘Use and File’
framework. This signifies a significant departure from the previous ‘File and
Use’ framework, which required prior approval for the introduction of products
to the market. This shift allows insurers to introduce new products to the
market more quickly, promoting faster innovation cycles.
b. Regulatory Sandbox: The Regulatory Sandbox is a framework
that offers a controlled environment for companies to test their innovative
products and technologies while adhering to regulatory guidelines. It serves as
a catalyst for innovation and technological advancements within the industry.
Amendments to the Regulatory Sandbox Regulations have extended the
experimentation period from '6 months' to 'up to 36 months.' Additionally, the
process has evolved from batch-wise (cohort approach) clearances/approvals to
clearances/approvals on a continuous basis. Furthermore, a provision for
reviewing rejected sandbox applications has been introduced as part of these
amendments.
c. Stakeholder Engagement: Beyond these initiatives, the IRDAI
remains committed to enhancing the product approval process and actively
encourages innovation. The IRDAI engages with various stakeholders through
initiatives such as Bima Manthan and Open House, fostering an environment that
welcomes and supports innovative ideas and solutions in the insurance sector.
In conclusion, the IRDAI actively
facilitates product innovation and promotes a culture of innovation and growth
in the insurance sector.