IRDAI’s reform agenda continues

     

Sanjiv Singh, Head, Marine & Specialty lines, GI Council

Insurance Regulatory and Development Authority of India (IRDAI) has committed to enable ‘Insurance for All’ by 2047, where every citizen has an appropriate life, health and property insurance cover and every enterprise is supported by appropriate insurance solutions and also to make Indian insurance sector globally attractive.

The focus of IRDAI is to strengthen the three pillars of the entire insurance ecosystem viz. insurance customers (policyholders), insurance providers (insurers) and insurance distributors (intermediaries).

Some important proposals approved in the 120th Meeting of the Authority held at its headquarters in Hyderabad on Friday, 25th November 2022:

1. Registration of Indian Insurance companies

The amendments to regulations pertaining to registration of Indian insurance companies are aimed at promoting ease of doing business and simplify the process of setting up an insurance company in India. Key highlights of the amendments areInvestment through Special Purpose Vehicle (SPV) has been made optional for Private Equity (PE) Funds enabling them to directly invest in insurance companies, providing more flexibility.

Now, subsidiary companies are also allowed to be promotors of insurance companies (subject to certain conditions).

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.

Indicative criteria for determination of ‘Fit and proper’ status of investors and promotors has been included

Lock-in period of investments for investors and promotors has been stipulated on the basis of age of insurer.

2. Increase in tie-up limits for intermediaries

In order to enable the policyholders/prospects to have wider choice and access to insurance through various distribution channels and facilitate the reach of insurance to the last mile, the 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 of life, general and health for distribution of their insurance products. The area of

operation of IMF has also been expanded to cover entire state in which they are registered.

 3. Regulatory sandbox

The Regulatory sandbox is a framework which provides a testing environment to the companies to enable them to test their innovative products, technologies, etc., in a controlled regulatory setting. It promotes innovation and technological solutions in the industry. Certain amendments were also carried out in the Regulatory Sandbox Regulations to allow the insurers/intermediaries to do experimentation on an ongoing basis by increasing the experimentation period from ‘6 months’ to ‘upto 36 months’ and moving from the existing batch-wise (cohort approach) clearances/approvals to clearances/approvals on a continuous basis. A provision for review of rejected applications under sandbox has also been

introduced as a part of amendments.

4. Other forms of capital

In order to facilitate ease of raising other forms of capital viz., subordinated debt and/or preference shares, the requirement of prior approval from IRDAI is dispensed with. The amendments have also enhanced the limits for raising such capital (threshold limits increased from 25% to 50% of paid up capital & premium, subject to 50% of Net worth of company). This will enable companies to raise the required capital in timely manner. Amendments have been introduced for Board’s Oversight in raising such capital.

5.Appointed Actuary

Appointed Actuaries (AA) play a pivotal role in the operations of an insurer. To ensure sufficient supply of Actuary professionals in the industry, the experience and qualification requirements have been made flexible.

 6.Solvency Norms for General Insurers

With an objective of facilitating the insurers to efficiently utilize their capital and resources and to increase insurance penetration in 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 which will release the capital requirements for insurers by around Rs. 1460 crore.

7. Listing of Insurance Companies

Listing of insurers in the stock exchanges allows the insurers to raise capital. It will also enhance the transparency, efficiencies and accountability of insurers. IRDAI has given final approval to Go-digit General Insurance Company for listing. Also, in-principle approval to IndiaFirst Life Insurance Company Limited has also been provided for listing.

Amendments to regulations follow a consultative process. IRDAI’s mission of protecting of policyholders’ interest and orderly growth of the insurance sector is always a priority. Efforts are made to reach the last mile by strengthening the entire ecosystem. A periodic review of the regulatory framework will be a continuous exercise to ensure that it is in sync with the emerging trends and dynamics of the market and serves.