IRDAI proposes sweeping insurance regulation overhaul to boost investment, ease compliance

The Insurance Regulatory and Development Authority of India (IRDAI) on Monday proposed a series of amendments to regulations governing insurer registration, capital structure, share transfers and amalgamations, as part of efforts to create a more transparent, growth-oriented and globally aligned insurance sector, Informist reported.

According to a consultation paper issued by the regulator, the proposed changes cover eligibility criteria for Indian and foreign promoters, safeguards related to foreign investment, norms governing special purpose vehicles (SPVs), approvals for share transfers, and the amalgamation of insurers with non-insurance entities. The proposals also include changes to processing fees and other clarificatory amendments.

As per Informist, IRDAI has proposed revisions to the definitions of "foreign promoter", "Indian promoter" and "special purpose vehicle" to remove ambiguities and strengthen regulatory oversight, particularly following the increase in foreign direct investment limits in the insurance sector.

Under existing regulations, SPVs are permitted to act as promoters. The regulator has now proposed that applicants provide justification for adopting an SPV structure. It has also suggested expanding the definition of eligible SPVs to include foreign-incorporated entities based in jurisdictions compliant with the Financial Action Task Force (FATF) framework, according to the consultation paper cited by Informist.

The proposed amendments are also aimed at improving ease of doing business by simplifying regulatory procedures, reducing compliance costs, enhancing operational clarity and facilitating capital infusion into the sector, Informist reported.

Among the proposed changes is the introduction of processing fees for applications seeking a no-objection certificate, along with a restructuring of provisions governing insurer names. IRDAI

said these measures are intended to formalise application procedures, improve regulatory clarity and ensure alignment with statutory requirements.

The regulator has also proposed clarifications on approval requirements for renunciation in rights issues and specified that approval would be required for every 5 percentage-point increase in shareholding. It has further proposed rationalisation of processing fees. According to the regulator, the amendments are intended to align regulations with revised statutory provisions, reduce ambiguities and simplify compliance obligations.

In a move aimed at lowering compliance costs for insurers, IRDAI has proposed substantial reductions in fees related to amalgamations and share-transfer approvals, Informist reported.

For amalgamation applications, the current fee structure—set at one-tenth of gross premium with a minimum charge of ₹5 million and a maximum of ₹50 million payable by each insurer—is proposed to be replaced with a flat fee of ₹1 million per transacting party.

Similarly, the fee for transfer-of-shares applications involving more than 50% of an insurer's equity is proposed to be reduced to ₹1 million from ₹5 million. The regulator said the changes are intended to improve ease of doing business and encourage investment and growth in the sector.

According to Informist, IRDAI has also proposed a regulatory framework governing insurer names, including a transition period for existing insurers to comply with the new norms and a requirement for prior regulatory approval before any change in an insurer's name.

The regulator has invited comments from insurers, promoters, investors, professional bodies, legal experts, policyholders and other stakeholders on the proposed amendments by July. 6.