The Insurance Regulatory and Development Authority of India (IRDAI) approved the amendments to rules registering insurance companies and investing in them.
- This decision has been taken to promote ease of doing business and to simplify the process of setting up an insurance company in India.
- It aims to enable policyholders, insurers and merchants to provide ‘insurance for everyone by 2047’.
What are the amendments?
i.A Private equity (PE) funds can now directly put in money in insurance companies, and investment by them through special purpose vehicles (SPVs) has been made optional.
- Currently, to invest in insurance companies as promoter, a PE fund can do so only through an SPV. However, if the PE fund is investing in an insurance company as investor, it can do so directly or through an SPV.
ii.Now, corporate agents, including banks, will be allowed to tie up with 9 insurers (up from three), and insurance marketing firms can distribute products of 6 insurers (up from two) in each line of Life, General, and Health insurance.
iii.No prior approval is needed by Insurance companies to raise capital in the form of subordinated debt and preference shares.
iv.A single investor taking 25% in an insurance company will be classified as investor and any investment more than that will make it a promoter.
- Currently, the threshold for being promoter as a single investor is more than 10%.
v.Promoters will be allowed to dilute their stake down to 26% on condition that the insurer has a satisfactory solvency record for the preceding 5 years and is a listed entity.
- Earlier, promoters were required to hold on to a 50% stake if it was more than that.
vi.The solvency ratio was reduced from 0.80% to 0.60% for unit-linked plans of life insurers and from 0.10% to 0.05% for Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).
Recent Related News:
i.IRDAI has set up a 15-member consultative committee for 2 years, for increasing health insurance coverage in India. The committee will meet physically or virtually at least once in a year or quarter. The 15-member consultative committee will be headed by Rakesh Joshi,
ii.IRDAI gave final clearance to HDFC Life Insurance Company Limited (HDFC Life) to merge Exide Life with the company.
About Insurance Regulatory and Development Authority of India (IRDAI):
Chairperson – Debasish Panda
Headquarters – Hyderabad, Telangana
Establishment – 1999 (Incorporated on 1st April 2000)