Daijiworld Media Network – New Delhi
New Delhi, Jun 16: The Insurance Regulatory and Development Authority of India (Irdai) has proposed a series of amendments to regulations governing insurer registration, capital structure, share transfers and amalgamations, aimed at making the insurance sector more transparent, investment-friendly and aligned with global practices.
The proposed changes follow the enactment of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, and are intended to facilitate growth while strengthening regulatory oversight.
A key proposal would allow the merger of insurance companies with non-insurance entities under specified conditions.
According to the draft amendments, the transferor company engaged in non-insurance activities must be the non-operative holding company of the insurer with which it seeks to amalgamate. The transferor company must also hold more than 50 per cent of the equity capital of the transferee insurer and should not be carrying out any business operations.
The regulator has proposed that the amalgamation scheme be prepared under the relevant provisions of the Insurance Act and that policyholders' funds of the insurer must not be used at any stage to meet liabilities, claims or obligations arising from the merger.
The board of the insurer will be required to ensure that the amalgamation does not adversely affect policyholders' interests. In addition, the insurer must demonstrate to Irdai that its solvency position after the merger will remain above the prescribed control level. The regulator currently mandates a solvency ratio of 150 per cent.
Irdai has also proposed that consideration for such amalgamations be paid only through the issuance of equity shares of the transferee insurer to shareholders of the transferor company. No other form of payment would be permitted.
The regulator further stated that shareholders of the transferor company receiving shares under the amalgamation scheme must satisfy the "fit and proper" criteria prescribed under the Registration Regulations, 2024.
In a move aimed at improving ease of doing business, Irdai has proposed a significant reduction in regulatory fees associated with amalgamations and share transfers.
At present, insurers seeking amalgamation are required to pay a fee equivalent to one-tenth of gross premium income, subject to a minimum of Rs 50 lakh and a maximum of Rs 5 crore. The regulator has proposed replacing this with a fixed fee of Rs 10 lakh payable by each party involved in the transaction.
Similarly, the application fee for transfer of more than 50 per cent equity, currently fixed at Rs 50 lakh, is proposed to be reduced to Rs 10 lakh.
The regulator believes the reduction in fees will lower compliance costs and encourage investment and consolidation within the sector.
Irdai has also proposed revisions to the definitions of "Indian promoter", "foreign promoter" and "special purpose vehicle" (SPV) to remove ambiguities and strengthen oversight, particularly following the increase in foreign direct investment limits in the insurance industry.
Under the revised framework, applicants using SPVs as promoters will be required to justify the adoption of such structures. The regulator has also proposed permitting foreign-incorporated SPVs from jurisdictions compliant with the standards of the Financial Action Task Force.
In addition, Irdai has issued clarifications regarding rights issues, stating that regulatory approval will be required for every five percentage-point increase in shareholding arising from such transactions.
The insurance regulator has invited comments and suggestions from stakeholders on the proposed amendments by July 6, 2026.
The changes are expected to support consolidation, attract fresh capital and improve operational flexibility while maintaining safeguards for policyholders and financial stability within the insurance sector.