INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
NOTIFICATION
Hyderabad, the 5th December, 2022
F. No. IRDAI/Reg/9/188/2022: In exercise of the powers conferred by Section 114A of the Insurance Act, 1938, section 3, section 3A and section 6A of the Insurance Act,1938 and section 26 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), the Authority, in consultation with the Insurance Advisory Committee, hereby makes the following Regulations, namely: –
1. Objective, Short title and Commencement.
(1) Objective: To promote growth of insurance sector by simplifying the process of registration of Indian insurance companies and to promote ease of doing business.
(2) Short Title: These Regulations may be called the Insurance Regulatory and Development Authority of India (Registration of Indian Insurance Companies) Regulations, 2022.
(3) Commencement: These Regulations shall come into force on the date of their publication in the Official Gazette and shall remain in force for a period of three years thereafter unless reviewed or repealed earlier.
2. Definitions
(1) In these Regulations, unless the context otherwise requires, –
(a) “Act” means the Insurance Act, 1938 (4 of 1938);
(b) “Authority” means the Insurance Regulatory and Development Authority of India established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(c) “Applicant” means a company as defined in sub-section (20) of section 2 of the Companies Act, 2013 (18 of 2013) or a statutory body established by an Act of Parliament or co-operative society to carry on insurance business;
(d) “Encumbrance” shall include –
(i) Pledge, lien, charge by whatever name called;
(ii) Any covenant, transaction, condition or arrangement in the nature of encumbrance, by whatever name called.
(e) “Foreign Investors” shall have the same meaning assigned to it in sub clause (g) of clause (1) of rule 2 of Indian Insurance Companies (Foreign Investment) Rules, 2015.
(f) “Foreign Promoter” means the “foreign investors” which meet one or more of the following conditions:
(i) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92 of the Companies Act, 2013;
(ii) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or
(iii) in accordance with whose advice, directions or instructions, the Board of Directors of the company is accustomed to act:
Provided that nothing in sub-clause (iii) shall apply to a person who is acting merely in a professional capacity.
(g) “Indian Investors” means “Investors” other than foreign investors.
(h) “Indian promoter” means –
(i) a company as defined in the Companies Act, 2013 (18 of 2013), which is not a subsidiary as defined in clause (87) of section 2 of that Act:
Provided that a subsidiary company may be allowed to be a promoter of the applicant if it meets the following conditions:
a. The said company is listed on the stock exchange(s) in India;
b. The said company has its own source of funds, independent from its holding company;
c. The said company has a net worth of atleast Rs.500 crore as at the end of the financial year preceding the date
of application; and
d. The holding company of the said company is not subsidiary of any other company.
(ii) a banking company as defined in clause (c) of section 5 of the Banking Regulations Act, 1949 but does not include a foreign bank or branch thereof functioning in India.
(iii) a Core Investment Company (CIC) under Core Investment Companies (Reserve Bank) Directions, 2016 as amended from time to time.
(iv) a public financial institution as defined in clause (72) of section 2 of the Companies Act, 2013 (18 of 2013).
(v) a co-operative society registered under any relevant law for the time being in force.
(vi) a limited liability partnership formed under the Limited Liability Partnership Act, 2008 (6 of 2009).
(vii) a Non-Operative Financial Holding Company (NOFHC) registered with Reserve Bank of India.
(viii) Any other person or entity as may be allowed by the Authority from time to time, which meets one or more of the conditions in clause (69) of Section 2 of Companies Act, 2013.
(i) “Investors” mean a person who is otherwise eligible to invest in the equity shares of insurance companies, and can be either an Indian Investor or a foreign investor.
(j) “Key Management Person” shall include members of the core management team of an insurer or applicant including all whole-time directors or Managing Directors or Chief Executive Officer and the functional heads one level below the Managing Director or Chief Executive Officer, including the Chief Financial Officer, Appointed Actuary, Chief Investment Officer, Chief Risk Officer, Chief Compliance Officer and the Company Secretary.
(k) “Preliminary Expenses” means expenses relating to the formation of an applicant. These include legal, accounting and share issue expenses incurred for the formation of the applicant and expenses incurred prior to grant of Certificate of Registration.
(l) “Private Equity Fund” or “PE Fund” includes –
(i) an Alternative Investment Fund or its manager registered with SEBI (Alternative Investment Fund) Regulations, 2012; and/or
(ii) a Fund or its manager registered for the purpose of investment, with International Financial Services Centres Authority; and/or
(iii) Funds specifically formed for investment which are registered or their manager is registered with any financial sector regulator in any FATF compliant jurisdiction.
(m) “Promoter” means Indian Promoter or Foreign Promoter or both.
(n) “Shareholding Pattern” means the shareholding pattern approved by the Authority at the time of grant of Certificate of Registration or at any subsequent time.
(o) “Special Purpose Vehicle” or “SPV” means a company registered under the provisions of Companies Act, 2013 or a Limited Liability Partnership formed under the Limited Liability Partnership Act, 2008 for the purpose of making investment in an insurer.
(p) “Transfer of Shares” includes transfer of shares from existing shareholder(s) to another person and includes transmission and fresh issuance of the equity shares which leads to change in the shareholding pattern of an insurance company.
(2) All words and expressions used herein and not defined in these Regulations but defined in the Insurance Act, 1938 (4 of 1938), or in the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or Rules or Regulations made thereunder shall have the same meanings respectively assigned to them in those Acts, Rules or Regulations.
3. Permissible Classes of Insurance Business
(1) The classes of business of insurance for which requisition for registration application may be made are:
(i) Life insurance business.
(ii) General insurance business.
(iii) Health insurance business exclusively.
(iv) Reinsurance business exclusively.
(v) Any other class as may be specified by the Authority.
(2) An applicant shall make a requisition for registration application only for any one of the classes of the business as specified by the Regulation 3(1).
4. Disqualifications for Applicant: An applicant shall not be eligible to apply for the requisition in the following circumstances:
i. Where the requisition for registration application or the application for registration has been rejected by the Authority or withdrawn by the applicant at any time during two financial years preceding the date of application; or
ii. Where Certificate of Registration has been cancelled by the Authority at any time during two financial years preceding the date of application; or
iii. Where the name of the applicant does not contain the words ‘insurance’ or ‘assurance’ or ‘reinsurance’.
5. Procedure for registration
(1) No-objection Certificate
i. No company or co-operative society shall be incorporated in India with a name that contains words ‘insurance’ or ‘assurance’ or ‘reinsurance’ without obtaining a No-objection Certificate from the Authority.
ii. Upon request by the applicant to issue the No-objection Certificate in the specified format, the applicant may be issued the No-objection Certificate.
iii. The No-objection Certificate issued to the applicant shall be valid for a period of 6 months within which the applicant shall file application for issuance of requisition for registration application i.e. Form IRDAI/R1:
Provided that the validity of the No-objection Certificate may be extended by a further period of three months for the reasons to be recorded in writing.
(2) R1 Approval
i. The Authority, upon receipt of application for issuance of Form IRDAI/R1 and after examining the matters considered relevant to its satisfaction, shall issue the Form IRDAI/R1 which shall be valid for a period of three months within which the applicant shall submit the duly filled Form IRDAI/R1 to the Authority for its consideration:
Provided that the Authority, by recording the reasons in writing, may reject the application for issuance of Form IRDAI/R1:
Provided further that the Authority, by recording the reasons in writing, may extend the validity of the IRDAI/R1 Form by another three months.
ii. Every application in the Form IRDAI/R1 as per the specified format shall be accompanied by:
a. The certificate of incorporation issued by Registrar of Companies in case of a company or Registration certificate in case of co-operative society;
b. a certified copy of the Memorandum of Association and Articles of Association, where the applicant is a company and incorporated under the Companies Act, 2013 (18 of 2013); or a certified copy of the legislation of Parliament setting up the statutory body to carry on insurance business;
c. In case of co-operative society, certified copy of bye-laws;
d. the name, address and the occupation of the directors of the promoter and the applicant;
e. a certified copy of the annual report of promoter(s) for up to the last five years, as applicable;
f. a certified copy of the shareholders’ agreement, as applicable, between promoter(s) and investor(s) of the applicant;
g. Projection of business for five years duly approved by the Board of Directors of the applicant along with a certificate from a fellow actuary that the projections are reasonable and workable;
a. Proof in support of payment of non-refundable fee of rupees five lakh along with applicable taxes towards processing the form IRDAI/R1 through any of the recognised modes of electronic fund transfer.
i. The Authority shall take into account such matters as may be considered relevant while processing the Form IRDAI/R1, including but not limited to the following:
a. the general track record of conduct and performance of each of the promoters and investors in the fields of business or profession they are engaged in;
b. the record of conduct and performance of the directors and persons in management of the promoters, investors and the applicant;
c. the financial strength of the promoters, investors and the applicant;
d. the capital structure of the promoters, investors and the applicant;
e. the sources of meeting the capital requirements of the applicant;
f. shareholding pattern of the applicant and its promoter(s);
g. the ability of the applicant and its promoters to meet the obligation to provide life insurance or general insurance or health insurance to the persons residing in the rural sector, workers in the unorganised sector or informal sector or for economically vulnerable or backward classes of the society and other categories of persons specified by the Authority;
h. the ability to meet the obligation to underwrite insurance business in third party risks of motor vehicles as specified by the Authority;
i. the planned infrastructure of the applicant;
j. the proposed business expansion plan for five succeeding years, including establishment of place of business in rural areas, to effectively carry out the insurance business; and
k. other relevant matters for carrying out the provisions of the Act.
ii. The Chairperson of the Authority, after examining the matters considered relevant and upon its satisfaction, shall issue the “R1” Approval subject to the conditions as may be specified in the said approval letter. Along with the said approval letter, the applicant shall be issued the application for registration i.e. Form IRDAI/R2.
iii. The “R1” approval shall be valid for a period of three months from the date of the said approval within which the applicant shall submit duly filled Form IRDAI/R2 for consideration of the Authority:
Provided that the Chairperson, by recording the reasons in writing, may extend the validity of the “R1” approval by a period of another three months.
(3) R2 Approval
i. Every application in the Form IRDAI/R2 as per the specified format shall be accompanied by:
a. An affidavit by the applicant and its promoters that the paid-up share capital of the applicant, after deducting the preliminary expenses, shall be adequate to comply with the requirements of section 6 of the Act.
b. A statement indicating the shareholding pattern of the applicant as on the date of the application.
c. An affidavit by the managing director or chief executive officer or whole-time director of the promoters and the investors of the applicant certifying that the holding of foreign paid-up equity capital, referred to in sub-clause (b) of clause (7A) of Section 2 of the Act, is calculated in accordance with Indian Insurance Companies (Foreign Investment) Rules, 2015 read with these Regulation and does not exceed seventy four percent of the total paid-up capital of the applicant:
Provided that in case of the Indian promoter being a Limited Liability Partnership, such affidavit shall be signed by the Designated Partner:
Provided further that in case of applicant being a co-operative society, the affidavit shall certify that the holding of foreign capital, referred to in sub-clause (c) of clause (8A) of Section 2 of the Act, does not exceed twenty six percent of the total capital of the applicant.
d. In case the applicant has foreign investment, an affidavit by the managing director or chief executive officer or whole-time director and the promoter(s) of the applicant certifying that the requirement of regulation 8 shall be complied with.
e. In case the applicant has foreign investment exceeding forty nine percent, an affidavit by the managing director or chief executive officer or whole-time director and the promoters of the applicant certifying that the requirement of regulation 9 shall be complied with.
f. A certified copy of the standard forms of the applicant and statements of the assured rates, advantages, terms and conditions to be offered in connection with insurance policies together with a certificate by an actuary in case of life insurance business that such rates, advantages, terms and conditions are workable and sound.
g. A certified copy of the Memorandum of Understanding or Management Agreement or Shareholders Agreement or Voting Rights Agreements or any other agreements in whatsoever form entered into, between the promoters and the investors, if any, or amongst the promoters as a whole including copies of the support or comfort letters exchanged between the parties.
h. A certificate from a practicing chartered accountant or a practicing company secretary certifying that all the requirements relating to registration fees, equity share capital, foreign investment limits and other requirements of laws for the time being in force including the Act have been complied with by the applicant.
i. Proof in support of payment of non-refundable fee of rupees five lakh along with applicable taxes towards processing the Form IRDAI/R2 through any of the recognised modes of electronic fund transfer.
ii. Upon completion of the processing of the Form IRDAI/R2 but prior to its approval by the Authority, the applicant shall submit:
a. Evidence of applicant having received equity share application money in accordance with section 6 of the Act and complied with conditions of R1 approval granted by the Authority.
b. An affidavit by the applicant, promoters and the investors that upon grant of Certificate of Registration, the said share application money shall be converted into paid-up equity share capital of the applicant.
iii. The Authority shall take into account the matters, as may be considered relevant while processing the form IRDAI/R2, including but not limited to the following:
a. the nature of insurance products proposed to be offered by the applicant;
b. the level of actuarial, accounting and other professional expertise within the management of the applicant;
c. the organisation structure of the applicant to carry on all functions in respect of the insurance business including management of the investments within its own organisation;
d. the applicant is eligible, and in its opinion, is likely to meet effectively its obligations imposed under the Act;
e. the financial condition of the promoters, investors and the general character of the management of the applicant are sound;
f. the volume of business likely to be available to, and the capital structure and earning prospects of the applicant will be adequate;
g. the interests of the general public will be served if the certificate of registration is granted to the applicant in respect of the class of insurance business specified in the application; and
h. the applicant has complied with the provisions of sections 2C, 5 and 31A of the Act and has fulfilled all the requirements of these sections applicable to it.
i. all other relevant matters for carrying out the provisions of the Act.
iv. The Authority, after examining the matters considered relevant and upon its satisfaction, shall, at its discretion, issue the “R2” Approval subject to the conditions as may be specified in the said approval letter.
(4) Grant of Certificate of Registration: After examining the matters considered relevant and upon its satisfaction, the applicant may be registered as an insurer for the class of business for which the applicant is found suitable and the chairperson of the Authority may grant the applicant the Certificate of Registration in Form IRDAI/R3 subject to the following conditions:
i. The applicant and its promoter(s) and investor(s) shall be “Fit & Proper” on a continuous basis;
ii. The promoter(s) and investor(s) shall comply with the specified lock in period, on their shareholding from the date of grant of Certificate of Registration;
iii. The promoter(s) and investor(s) of the applicant shall not create any encumbrance on the equity shares of the applicant during the lock in period as may be specified;
iv. the shareholders of the applicant shall not create any encumbrance on the equity shares of the insurer without the previous written approval of the Authority in accordance with sub section (4) of section 6A of the Act;
v. The applicant and promoter(s) shall be continuously bound by all the conditions and the investor(s) by such conditions as may be applicable subject to which the certificate in Form IRDAI/R3 has been issued;
vi. The applicant shall furnish, within 15 days, evidence of applicant having allotted shares to its promoters and investors in accordance with section 6 of the Act and having complied with the conditions as per R1 approval and R2 approval granted by the Authority; and
vii. Such other conditions as may be deemed fit at the time of grant of Certificate of Registration.
(5) Commencement of Insurance Business: An applicant granted the Certificate of Registration under these Regulations shall commence insurance business, for which it has been authorised, within 12 months from the grant of Certificate of Registration. In case, the applicant fails to commence business within the stipulated time, the certificate of registration shall not be valid after expiry of stipulated time:
Provided that in case the applicant is not in a position to commence the insurance business within the specified period of 12 months, it can before the time limit expires, seek an extension from the Authority through a written application. The said application shall highlight the reasons for not being able to commence business within the specified period of 12 months:
Provided further that no extension of time shall be granted by the Authority beyond 24 months from the date of grant of Certificate of Registration.
(6) Rejection of Application
i. The requisition for registration application or the application for registration may be rejected by the Authority, after giving the applicant a reasonable opportunity of being heard, in following cases:
a. Where an application is not complete in all respects.
b. Where the requirements under the provisions of the Act or the Regulations framed thereunder are not met at any stage of the process.
c. For any other reasons to be recorded in writing.
ii. The order rejecting the application shall be communicated by the Authority to the applicant, in writing, within a period of thirty days of such rejection stating therein the grounds on which the application has been rejected.
iii. An applicant, whose application for registration has been rejected at any stage, shall not be entitled to a Certificate of Registration.
(7) Further Information and Clarification: The Authority may require the applicant, which makes an application under these regulations, to furnish further information or clarifications regarding the matters relevant for the consideration of the application at any stage of the process.
(8) The Authority may impose such conditions as may be deemed fit at the time of grant of No-objection Certificate, R1 approval, R2 approval or the Certificate of Registration. The applicant shall be bound by the conditions subject to which the approvals and/or certificate of registration has been issued.
(9) Appeal to SAT: An applicant aggrieved by the decision of the Authority, at any stage under these regulations, may appeal before the Securities Appellate Tribunal as per the provisions of the Act.
1. Compliance Requirement:
(1) Lock-in period: The equity shares of the applicant shall be locked-in for the period as under:
| S. No. | Particulars | Investment in the capacity of | Lock-in Period |
| 1 | Investment at the time of or before
grant of R3 (i.e. Certificate of |
Promoter or
Investor |
5 years from the date of grant of R3 |
| 2 | Investment during 5 years post grant of R3: In case of change in shareholding pattern | Promoter or
Investor |
Earlier of the following:
a) 5 years from the date of investment; or b) 8 years from the grant of R3. |
| 3 | Investment after 5 years but before 10 years post grant of R3: In case of change in shareholding pattern | Promoter | Earlier of the following:
a) 3 years from the date of investment; or b) 12 years from the grant of R3 |
| Investor | Earlier of the following:
a) 2 years from the date of investment; or b) 11 years from the grant of R3 |
||
| 4 | Investment after 10 years post grant of R3: In case of change in shareholding pattern | Promoter | 2 years from the date of investment |
| Investor | 1 year from the date of investment |
Provided that the Authority may relax the lock-in period to enable the insurer to list its shares on the stock exchange(s) in India.
(2) Fit and Proper Criteria:
i. The Authority shall assess the applicant, its promoters and investors on the fit and proper criteria on the basis of factors as may be considered relevant including but not limited to those specified in Schedule 1 of these Regulations.
ii. The applicant, promoter and investors shall be fit and proper on a continuous basis i.e., even after the grant of Certificate of Registration.
iii. In case, the applicant, its promoters and/or investors are found to be not fit and proper at any stage, the Authority may take such action as may be deemed appropriate.
(3) Special Purpose Vehicle: In case the applicant is promoted by a Special Purpose Vehicle (SPV), the following conditions shall be complied with:
i. The SPV shall not issue convertible instruments of any kind;
ii. No stock options or sweat equity shares shall be issued to the employees or directors of SPV;
iii. Prior approval of the Authority shall be obtained for transfer of shares of the SPV as per the limits specified under Section 6A of the Act in accordance with the manner specified in Schedule 2 of these Regulations;
iv. The investment limits, lock-in period and other requirements as per these Regulations shall also be applicable at the SPV level;
v. The criteria as specified in clause (iii) of sub regulation (2) of Regulation 5 shall also be applicable for the promoter and investor of the SPV;
vi. The equity shares to be issued by the SPV shall be valued at a price determined on the basis of valuation certificate issued by two SEBI Registered Category-I Merchant Bankers. Such certificates shall not have been issued prior to 30 days from the date of allotment of shares. The Merchant Bankers shall provide a proper report addressed to the Board of directors with justification for such valuation. A copy of the summary along with critical elements of the valuation report shall be sent to the shareholders along with the notice of the general meeting; and
vii. The paid-up capital of the SPV shall be equal to or more than the minimum paid up capital of the applicant required under section 6 of the Act.
(4) Operating Company: In case the applicant is promoted by an operating company, the said promoter will be subject to necessary due-diligence including but not limited to the following:
i. The examination of the nature of operating company on the basis of substance over form;
ii. The track record of business operations, liquidity and profitability;
iii. Ability of the promoter to raise capital to meet the business and solvency requirements of the applicant, on an ongoing basis; and
iv. The shareholding pattern of the promoter.
(5) Investment as “Promoter”: Investment in the capacity of promoter, directly or indirectly, in an insurer shall
be in compliance with the following:
i. The person shall not be a promoter of more than one life insurer, one general insurer, one health insurer and one reinsurer;
ii. The person shall submit an undertaking to infuse capital in the insurer to meet its solvency and/or business requirements, if any, in future; and
iii. The person is otherwise eligible to act as promoter of the insurer under these Regulations.
(6) Promoter(s) Holding: The minimum shareholding of all the promoter(s) of the insurer shall be collectively maintained at above fifty (50) per cent of the paid up equity capital of the insurer:
Provided that promoter(s) may dilute their stake in the insurer below fifty (50) percent but not below twenty-six (26) percent of the paid up equity capital of the insurer in case the following conditions are complied with:
a. The insurer has track record of solvency ratio above control level during 5 years immediately preceding the dilution of stake by promoter(s), and
b. The shares of the insurer are listed on the stock exchange(s) in India.
(7) Investment as “Investor”: Investment in the capacity of investor, directly or indirectly, in an insurer shall be in compliance with the following:
i. The investment by a single “investor” shall be less than twenty five (25) percent of the paid-up equity share capital of insurer.
ii. The investment by all the “investors” collectively shall be less than fifty (50) percent of the paid-up equity share capital of the insurer:
Provided that the said restriction shall not be applicable in case the equity shares of the insurer are listed on the stock exchange(s) in India.
iii. Number of Insurers:
a. An investor may invest in any number of insurers provided that the investment does not exceed ten percent of the paid-up capital of the respective insurers.
b. In case of investment of more than ten percent but less than twenty-five percent of paid-up capital of the insurers, investment by the investor shall be restricted to not more than two insurers in each class of insurance business.
Provided that the investor may nominate a director on the Board of the insurer if its investment exceeds 10 percent of the paid up capital of the respective insurer.
iv. In case of a one-time investment by an investor in an unlisted insurer, the investor shall make an upfront
disclosure to this effect to the insurer. In such a case, the promoter(s) shall submit an undertaking to the Authority to infuse capital in the insurer to meet its solvency and/or business requirements, if any, in future.
(8) Additional Stipulations for Investment by promoter and/or investor: Investment shall also be in compliance with the following:
i. Investment shall be made entirely out of own funds and not from borrowed funds.
ii. In case any of the group entities or body corporate under the same management have also invested in the insurer, the limits under these Regulations shall apply at the group level.
For the purposes of this sub-clause, the expressions “group” and “same management” shall have the meanings respectively as provided under explanation to section 6A(4)(b)(iii) of the Act.
iii. The provisions relating to transfer of shares as contained in Section 6A(4)(b) of the Act shall apply mutatis-mutandis to the creation of pledge or any other kind of encumbrance over shares of an insurer.
iv. In case of investment by an entity in more than one insurer, directly or indirectly:
a. The person shall disclose the facts related to common holding to all the investee insurers;
b. The person along with the insurer shall put in place mechanism to avoid any conflict of interest that may arise due to the said common equity holding; and
c. The director nominated by the said person shall recuse from the discussions on any matter pertaining to other investee insurer(s), where the conflict of interest may arise.
(9) Criteria for Investment by the Private Equity Funds:
i. The private equity funds may invest in the applicant in the capacity of a promoter or investor in the manner as specified under these Regulations.
ii. Investment in the insurer, including proposed limit in respect of future capital requirement of the insurer, shall be as per the PE Fund’s strategy reflected in its placement memorandum to its investors or its charter documents.
iii. A Private Equity Fund may invest in any insurer in the capacity of “promoter”, only if it meets the following criteria:
a. The manager of the PE Fund or its Parent Fund has completed 10 years of operation;
b. The funds raised by the PE Fund including its group entity(ies) is USD 500 million or more (or its equivalent in INR);
c. The investible funds available with the PE Fund is not less than USD 100 million; and
d. The manager of the PE Fund has invested in the financial sector in India or the other jurisdictions.
(10) Transfer of Shares: No registration of transfer of shares or issue of equity capital of an insurance company, which would result in change in shareholding, shall be made, where:
i. after the transfer, the total paid-up holding of the transferee in the shares of the insurance company is likely to exceed five percent of its paid-up capital; or
ii. the Nominal value of shares intended to be transferred by an individual, firm, group, constituents of a group, or body corporate under same management, jointly or severally exceeds one percent of the paid-up equity capital of the insurance company.
Unless the prior approval of the Authority has been obtained for the said transfer in the manner as specified in Schedule 2 of these Regulations.
2. Manner of calculation of equity capital held by foreign promoter and foreign investor:
For the purposes of the Act and these Regulations, the calculation of the holding of equity shares by one or more foreign investors and/or foreign promoters in the applicant company, shall be made as under and shall be aggregate of:-
(i) the quantum of paid up equity share capital held by the foreign Investor(s) and foreign promoter(s) including foreign venture capital investor(s), in the applicant company; and
(ii) the proportion of the paid up equity share capital held or controlled by such foreign investor(s) or foreign promoter(s) either by itself or through its subsidiary companies in the Indian promoter(s) or Indian Investor(s) as mentioned in sub-clause (i) of this Regulation.
Provided that clause (ii) shall not be applicable to an Indian promoter or Indian investor referred in clause (ii) and (iv) of clause (h) of sub-regulation (1) of Regulation 2.
Provided further that the clause (ii) shall not be applicable to any Indian promoter or Indian investor of a listed Indian insurer where such Indian promoter and/or Indian investor are regulated by Reserve Bank of India, Securities and Exchange Board ofIndia and/or National Housing Bank.
3. Requirement of Resident Indian citizenship for Directors, Key Management Persons, etc.
In an Indian Insurance Company having foreign investment —
(a) a majority of its Directors,
(b) a majority of its Key Management Persons, and
(c) at least one among the Chairperson of its Board, its Managing Director and its Chief Executive Officer, shall be Resident Indian Citizens.
Explanation: For the purpose of this regulation, the expression “Resident Indian Citizen” shall have the same meaning as assigned to it in clause (o) of sub-rule (1) of rule 2 of Indian Insurance Companies (Foreign Investment) Rules, 2015.
4. Requirements for foreign investment exceeding forty-nine percent
In an Indian Insurance Company having foreign investment exceeding forty-nine per cent—
(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.
5. Annual Fee
(1) An insurer who has been granted a Certificate of Registration under Section 3 of the Act shall pay, an annual fee along with applicable taxes for every financial year to the Authority before 31st day of January of the preceding financial year.
(2) The annual fee shall be higher of
i. Ten lakh rupees, or
ii. One-twentieth of one per cent of total gross premium written direct by an insurer in India during the financial year preceding the year in which the annual fee is required to be paid, or rupees ten crore whichever is less;
Provided that in the case of an insurer carrying on solely re-insurance business, instead of the total gross premium written direct in India, the total premium in respect of facultative reinsurance accepted by it in India shall be taken into account.
(3) The annual fee shall be paid into the account of Insurance Regulatory and Development Authority of India. The annual fee shall be remitted through any of the recognised modes of electronic funds transfer.
(4) If the insurer fails to deposit the annual fee before the date specified in sub-regulation (1), the Authority may accept the payment of annual fee along with an additional fee by way of penalty of
i. Two percent of the annual fee if the fee is paid within 30 days after the expiry of the last date of payment of annual fee; or
ii. Ten percent of the annual fee if the fee is paid after expiry of the last date of payment stipulated in this Regulation but before the end of financial year in which the annual fee was required to be paid.
(5) Where the insurer has failed to pay the fee before the end of the financial year in which it is due to be paid, certificate of registration is liable to be cancelled in terms of provisions of Section 3 read with sub section (2) of Section 3A of the Act.
6. Issue of duplicate certificate: The Authority may, on receipt of fee of rupees five thousand along with applicable taxes, issue a duplicate certificate to an insurer, if the insurer makes an application to the Authority in Form IRDAI/R4, as specified.
7. Suspension or Cancellation of Certificate of Registration
(1) Cancellation of registration pursuant to voluntary surrender of Certificate of Registration by Insurer:
i. The insurer may surrender the Certificate of Registration granted to it and may request the Authority to cancel the same in the following cases:
a. The business or a class of the business of the insurer has been transferred to any person pursuant to the Order of the Authority to this effect.
b. The business or a class of the business of the insurer has been transferred to or amalgamated with the business of any other insurer after obtaining approval of the Authority.
c. The insurer is not in the position to commence its operations, subsequent to grant of Certificate of Registration, within the stipulated time.
ii. The Authority, after examining the request, may cancel the Certificate of Registration subject to such conditions as may be necessary to protect the interest of the policyholders of the insurer.
(2) Suspension or Cancellation of registration: Without prejudice to any penalty which may be imposed or any action taken under the provisions of the Act, the registration of any insurer may be suspended or cancelled for a class or classes of insurance business for such period as may be specified by the Authority by an order under the following circumstances:
i. the insurer fails, at any time, to comply with any provisions of the Act in general and provision of Section 64V and Section 64VA of the Act in particular,
ii. the insurer is in liquidation or is adjudged as an insolvent,
iii. the business or a class of the business of the insurer has been transferred to any person or has been transferred to or amalgamated with the business of any other insurer without the approval of the Authority,
iv. defaults in complying with, or acts in contravention of, any requirement of the Act or of any Rule or any Regulation, Direction or Order issued by the Authority, particularly if the insurer:
a) conducts its business in a manner prejudicial to the interest of the policyholders;
b) fails to furnish any information as required by the Authority relating to its insurance business;
c) does not submit periodical returns as required under the Act or as directed by the Authority;
d) does not cooperate in any inquiry conducted by the Authority;
e) indulges in manipulative practices;
f) indulges in unfair trade practices;
g) fails to make investment in the infrastructure or social sector specified in theregulations.
v. the Authority has reasons to believe that any claim upon the insurer arising in India under any policy of insurance remains unpaid for three months after final judgment in regular court of law,
vi. the insurer carries on any business other than the class of insurance business for which registration has been granted by the Authority or any specified business,
vii. the insurer defaults in complying with any direction issued or order made, as the case may be, by the
Authority under the Insurance Regulatory and Development Authority Act, 1999,
viii. the insurer defaults in complying with, or acts in contravention of, any requirement of the Companies Act, 2013, or the General Insurance Business (Nationalisation) Act,1872 or the Foreign Exchange Management Act, 1999 or the Prevention of Money Laundering Act, 2002;
ix. the insurer fails to pay the annual fee required under section 3A of the Act, or
x. Insurer or promoter of the insurer are no more compliant with the “Fit & Proper” criteria specified as per Schedule 1; or
xi. the insurer is convicted for an offence under any law for the time being in force:
Provided that the Authority for reasons to be recorded in writing may, in case of repeated defaults of the type mentioned above, impose a penalty of cancellation of Certificate of Registration.
(3) Procedure for Suspension of Certificate of Registration
i. No order of suspension of Registration under sub-clause (2) shall be imposed without granting an opportunity of being heard to the insurer.
ii. The Authority shall serve a show-cause notice to the insurer seeking explanation from the insurer as to why action against the insurer should not be taken. The show-cause notice shall include the charges or reasons for which the action is proposed to be taken.
iii. The Authority shall allow a time period of twenty-one days for the insurer to respond to the show-cause notice.
Provided that in cases where it is considered appropriate to take immediate action to protect the interest of the policyholders, the insurer may be asked to submit its response within such period as may be deemed appropriate to the Authority.
iv. The Authority after considering the reply to the show-cause notice, shall as soon as possible but not later than thirty days from the receipt of the reply, pass such orders as it deems fit. If no reply is furnished to the Authority by the insurer within the time period as per the show cause notice, the Authority can proceed to decide the issue ex-parte.
v. An order passed by the Authority shall give reasons therefor including justification of the penalty imposed by that Order.
vi. The Authority shall send a copy of the Order made to the insurer within seven days of passing the Order.
(4) Procedure for Cancellation of Certificate of Registration
i. No order of cancellation of Registration under sub-clause (2) shall be made except after holding an enquiry in accordance with the procedure specified in these Regulations.
ii. For the purpose of holding an enquiry under this regulation, the Authority may appoint an enquiry officer.
iii. The enquiry officer shall issue a notice to the insurer at the registered office or the principal place of business of the insurer.
iv. The insurer may, within twenty one days from the date of receipt of such notice, furnish to the enquiry officer a reply, together with copies of documentary or other evidence relied upon by it or sought by the Authority from the insurer.
v. The enquiry officer shall give a reasonable opportunity of being heard to the insurer to enable it to make submissions in support of its reply.
vi. If it is considered necessary, the enquiry officer may ask the Authority to appoint a presenting officer to present its case.
vii. The insurer may appear before the enquiry officer, either in person or through any person duly authorised by the insurer:
Provided that no advocate shall be permitted to represent the insurer at the enquiry:
Provided further that where an advocate has been appointed by the Authority as the presenting officer, it shall be lawful for the insurer to present its case through an advocate.
viii. The enquiry officer shall, after taking into account all relevant facts and submissions made by the insurer, submit a report to the Authority and recommend the penalty as also the justification of the penalty proposed.
ix. On receipt of the report from the enquiry officer, the Authority shall consider the same and if considered necessary by it, issue a show-cause notice as to why an action, as it considers appropriate, should not be taken against the insurer.
x. The insurer shall, within twenty-one days of the date of receipt of the show-cause notice, send a reply to the Authority.
xi. The Authority after considering the reply to the show-cause notice, shall as soon as possible but not later than thirty days from the receipt of the reply, pass such orders as it deems fit. If no reply is furnished to the Authority by the insurer within 90 days of the servicing of the notice, the Authority can proceed to decide the issue ex-parte.
xii. The Order passed by the Authority shall give reasons therefor including justification of the penalty imposed by that Order.
xiii. The Authority shall send a copy of the Order made to the insurer within seven days of passing the Order.
(5) Effect of suspension or cancellation of Certificate: On and from the date of suspension or cancellation of the Certificate of Registration, the insurer shall cease to transact new insurance business:
Provided that the Authority may direct the insurer to continue to service the existing policyholders for such period as may be specified in the Order made under these Regulations.
(6) Publication of order: The Order of the Authority passed under Regulations 12(4) of these Regulations shall be published in atleast two daily newspapers in the area where the insurer has its principal place of business.
(7) Appeal to SAT: An insurer aggrieved by the Order of the Authority, under these regulations, may appeal before the Securities Appellate Tribunal under section 110 of the Act.
8. Power to issue clarifications: In order to remove any difficulties in application or interpretation of any provisions of these Regulations, the Chairperson of the Authority may issue clarifications or directions as deemed necessary.
9. Interpretation: The Chairperson of the Authority shall have powers for interpretation of these Regulations. The interpretation of the Chairperson of the Authority shall be final and binding on the applicants and insurers.
10. Repeal and Savings
(1) The following Regulations shall be repealed from the date these Regulations come into force:
a) Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations, 2000; and
b) Insurance Regulatory and Development Authority of India (Transfer of Equity Shares of Insurance Companies) Regulations, 2015.
(2) Unless otherwise provided by these Regulations, anything done or any action taken or purported to have been done or taken in respect of the Regulations mentioned in sub-regulation (1) shall be deemed to have been done or taken under the corresponding provisions of these regulations.
Schedule 1: Fit & Proper Criteria
(refer sub regulation (2) of regulation 6 and clause (x) of sub regulation (2) of regulation 12)
Determination of “Fit and Proper” Status – Illustrative criteria for determining “fit and proper” status of applicants, promoters and/or Investors
In determining whether an entity is “fit and proper” to be a promoter or investor of Indian insurance companies, the Authority may take into account all relevant factors, as appropriate, including, but not limited to the following:
i. The entity’s integrity, reputation, track record:
1. The financial strength of the promoter or investor.
2. Ability to infuse capital to meet business, solvency and regulatory requirements.
3. Compliance with all applicable laws in India including FEMA and taxation law.
4. Ability to access capital or financial markets to source funds that may be needed for any future capital infusion.
5. Business record and experience of the entity.
ii. Due-diligence
1. Approval or NOC by other regulatory bodies in India and/or outside India, as applicable;
2. Insider trading, fraudulent or unfair trade practices or market manipulation by the promoters, investors or group entities.
3. Proceedings including conviction against the entity or any of its promoter or group entities or any of its KMPs, by any regulatory or statutory or judicial bodies in India or outside India.
iii. Interest of policyholders and general public at large.
iv. Impact on the management and governance structure.
v. Agreement between shareholders and impact on control or management.
vi. Shareholding and Capital structure of the promoter or investor.
vii. Source of funds for investment.
viii. Beneficial ownership of shares of investors or promoters.
Schedule 2: Transfer of Shares
(refer clause (iii) of sub regulation (3) of regulation 6 and sub regulation (10) of regulation 6)
The prior approval for the purpose of transfer of shares, as may be required, under section 6A of the Act read with clause (iii) of sub regulation (3) of regulation 6 and sub regulation (10) of regulation 6 of these Regulations shall be obtained in the following manner.
(1) Application seeking prior approval of the Authority:
a) Application in specified form: The application seeking prior approval of the Authority under the provisions of Section 6A of the Act shall be made in form(s) as specified by the Authority, accompanied by the requisite documents and the details of the transferor and transferee as specified, providing complete details of the proposed transferee, its financial strength, sources of funds from which the proposed investment is intended to be made, and such other information as may be specified by the Authority.
b) Declaration on Beneficial Shareholding: The application for transfer of shares shall be accompanied by a declaration from the proposed shareholder whether the shares are proposed to be held for his own benefit or as a nominee, whether jointly or severally, on behalf of others and in the latter case giving the name, occupation and address of the beneficial owner or owners, and the extent of the beneficial interest of each.
c) Certificate by Merchant Banker: The application for transfer of shares shall be accompanied by a certificate from Category-I Merchant Banker registered under SEBI, certifying the fair value per share of the insurer. Such certificate shall not have been issued more than 30 days prior to the date of application.
d) Processing Fees: Every application seeking prior approval of the Authority for transfer of shares under this schedule shall be accompanied with the proof of payment of non-refundable fee of Rs.1 lakh along with applicable taxes.
(2) Due Diligence: The Authority shall carry out the requisite due diligence of the proposed transferee prior to grant of approval for registration of transfer of shares under the provisions of sub section (4) of Section 6A of the Act or for issue of shares to the proposed transferee.
(3) Conditions for Approval: The Authority shall, while according its approval, specify such conditions on transferee as it may consider appropriate, including but not limited to:
a) Lock-in period as per Regulation 6(1) of these Regulations.
b) Infusion of additional capital in proportion of its shareholding or otherwise, at periodic intervals to ensure that the insurance company is compliant with the regulatory solvency requirements at all times; and
c) Compliance with all the conditions imposed by the Authority while granting Certificate of Registration i.e. R3.
(4) Transfer of shares in case of listed insurance companies:
a) Transfer of 1% or more but less than 5% of paid-up equity capital of insurer:
i. Every person who intends to make any transfer or make any arrangement or agreement for transferring one percent or more but less than five percent of the paid up equity share capital of the insurer, may do so, subject to filing of self-certification of the Fit and Proper criteria, of the acquirer, with the insurer.
ii. Such filing with the insurer shall be considered as the deemed approval of the Authority for the purpose of Section 6A(4)(b)(iii) of the Act.
iii. The transferor shall inform the Insurer immediately on execution of the transaction. The transferor is required to ensure compliance for any transaction(s) aggregating to more than 1 per cent of the paid-up capital.
b) Acquisition of 5% or more of paid-up equity capital of insurer:
i. Every person, who intends to make an acquisition or make an arrangement or agreement for acquisition which shall or is likely to take the aggregate holding of such person to five per cent or more of the paid-up equity share capital of the insurer, shall seek prior approval of the Authority in the manner specified in this Schedule.
ii. For any subsequent acquisition of shares of the insurer by such person upto ten per cent of the paid-up capital of the insurer, prior approval of the Authority is not necessary,
c) Notwithstanding any of the above, even when the acquisition or aggregate holding is proposed to be less than five percent and if the concerned insurer suspects that dubious methods have been adopted to get over the ceiling of five percent to camouflage the real purpose by individuals or groups with a view to acquire controlling interest in the insurer, a reference shall be made to the Authority by the concerned insurer. In such cases, it shall be in order for the Authority to require such shareholders to comply with the Due Diligence and Fit and Proper criteria.
(5) Determination of extent of transfer:
a) For the purpose of reckoning the quantum of transfer or acquisition of shares, scenarios where transfer is executed in favor of one or more parties, whether in a single or multiple transactions aggregating to excess of one per cent or five per cent, the cumulative transfers made during a given financial year shall be considered. Accordingly, whenever the specified limits are likely to exceed in a financial year, the entity shall be under obligation to seek the prior approval of the Authority.
b) Listed companies: In case of companies listed on the stock exchanges
i. The provisions at (a) above shall be applicable only with respect to the promoters or promoter group.
ii. Transfer shall include Offer for Sale as per SEBI (ICDR) Regulations by the existing shareholders, whether or not such shareholder is part of the promoter or promoter group.
(6) Pledge of Shares of Insurance Company: the provisions relating to transfer of shares as contained in Section 6A(4)(b) of the Act and this Schedule shall apply mutatis-mutandis to the creation of pledge or any other kind of encumbrance over shares of an insurance company.
(7) Reporting requirements:
a) Every insurer who has been granted registration under the Act shall, within 30 days of the end of every quarter, furnish, in the specified format, to the Authority a statement indicating changes exceeding 1% of the shareholding of the promoter. However, any change in excess of 5% of the shareholding of the promoters shall be reported to the Authority immediately.
b) Every insurer shall file a declaration on quarterly basis that its promoters and investors are ‘Fit and Proper’.
c) Insurance companies shall immediately inform the Authority if any non-compliance is observed with regard to the provisions of the Act, the Regulations and Guidelines framed thereunder and the Circulars issued regarding the transfer of shares by the Authority.
d) In terms of Section 26 of the Act, an insurer shall forthwith furnish to the Authority the full particulars of any alteration which occurs or is made which affects any of the following matters:
i. Any encumbrance created on the shareholding of the promoter,
ii. Any change of control of the promoter,
iii. Any penal or regulatory action taken against the promoter,
iv. Any other matters which may be specified by the Authority from time to time.
(8) Action for Violation or Non-Compliance
In case of transfer of shares executed beyond the stipulated threshold limits by the shareholders, without the prior approval of the Authority shall attract regulatory action and;
a) The transferee shall not have any voting rights in any of the meetings of the insurance company.
b) The transferee shall promptly dispose of the excess shares acquired, beyond the specified threshold limit.
FORM IRDAI/R3
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
(Seal of the Authority)
CERTIFICATE OF REGISTRATION
Registration Number: ….xxx….
This is to certify that (Name of Insurer and address) …………………………………………….. (xxxx)… has this day…..(xxx)….been registered in accordance with the provisions of sub section (2A) of section 3 of the Insurance Act, 1938 (4 of 1938) to transact the (xxx)…class of business.
Given under the seal of the Authority at Hyderabad this….(xx) ….day of…(xxx)…two thousand and ……… (xxx)……….
Signature
(Competent Authority)
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
DEBASISH PANDA, Chairperson
[ADVT.-III/4/Exty./450/2022-23]
