IRDAI relaxes entry norms for insurance biz, reduces solvency margin

New Delhi: Insurance regulator IRDAI on Friday approved a host of reforms, including easing the entry norms and reducing solvency margin that will unlock Rs 3,500 crore-worth capital for the insurers. The latest decisions are aimed at increasing the insurance penetration in the country and enabling 'Insurance for All by 2047'. The Insurance Regulatory and Development Authority of India (IRDAI) at its board meeting has also approved a proposal to permit Private Equity (PE) funds to invest directly in insurance companies. Besides, the watchdog has allowed subsidiary companies to be promoters of insurance companies.

'Changes to allow promoters to dilute stake up to 26%'

According to a statement issued by IRDAI, "A single entity making investment of up to 25 percent of the paid-up capital and 50 percent for all investors collectively will be treated as 'investor' in insurance companies. Investments over and above that will only be treated as 'promoter.'" Earlier, the threshold was 10 percent for individual investors and 25 percent for all investors collectively. IRDAI said that a new provision has been introduced to allow the promoters to dilute their stake up to 26 percent, subject to the condition that the insurer has a satisfactory solvency record for the preceding five years and is a listed entity.

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 CA can tie-up with 9 insurers & IMF with 6 insurers

"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," IRDAI said. In order to enable the policyholders to have wider choice and access to insurance, the maximum number of tie-ups for Corporate Agents (CAs) and Insurance Marketing Firms (IMFs) has been increased.

"Now, a CA can tie-up with 9 insurers (earlier 3 insurers) and an 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," IRDAI said.

IRDAI to enable "Insurance for All" by 2047

According to the statement, the regulator has committed to enabling 'Insurance for All' by 2047. To attain this objective, efforts are being made towards creating a progressive regulatory architecture to foster a conducive and competitive environment leading to wider choice, accessibility and affordability to policyholders, it added. With an objective to allow general insurers to efficiently utilise their capital, the solvency factors related to crop insurance have been reduced to 0.50 from 0.70 which will release the capital requirements for insurers by around Rs 1,460 crore. In the case of life insurers, the factors for calculation of solvency for unit-linked business (without guarantees) have been reduced to 0.60 percent from 0.80 percent and for PMJJBY, to 0.05 percent from 0.10 percent. This will provide a relaxation in capital requirements by around Rs 2,000 crore, IRDAI said.

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