Regulations On Registration, Capital Structure And Transfer Of Shares Of Insurers

To promote ease of doing business, IRDAI issued IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024¹, (“RCTA Regulations”). The RCTA Regulations repeal 7 (seven) regulations² and streamlines the process of registration, acquisition and transfer of shares, and amalgamation of insurers. Some of the key provisions are as follows: 

1. Registration of insurer: Under the RCTA Regulations, an applicant may make a requisition for registration for any one of the following classes of insurance business: (a) life insurance business; (b) general insurance business; (c) health insurance business; and (d) reinsurance business. On receiving the application, the Competent Authority (chairperson, or a member determined by the chairperson) issues the certificate of registration. The certificate of registration becomes invalid if the applicant does not commence insurance business within 12 (twelve) months from the grant of such certificate.
2. Capital structure: The amount of minimum paidup equity capital for each type of business is detailed. It also details the lock-in period for issuers not having their shares listed on any stock exchange recognised in India. Further, the investment limits, lock-in period and other share issuing related requirement are also prescribed under the RCTA Regulations.
3. Transfer of shares: the RCTA Regulations detail the manner of obtaining prior approval of IRDAI for certain transfer of shares. An application for transfer of shares is required to be accompanied by a declaration from the proposed shareholder and a certificate from category-I merchant banker registered under SEBI, certifying the fair value per share of the insurer. Any transfer of shares executed beyond the stipulated threshold limits without the prior approval of IRDAI will attract regulatory action.
4. Amalgamation and transfer of insurance business: Any transfer or amalgamation of insurance business must be in accordance with a scheme prepared under the Insurance Act, 1938 (“Insurance Act”) and approved by IRDAI in accordance with the RCTA Regulations. RCTA Regulations lists the factors on which applications can be examined, and the final approval be given by IRDAI.

Subsequently, a master circular was issued to specify various forms and provide clarifications on various provisions prescribed under RCTA Regulations,³ such as details of various applications to be submitted for including registration as an insurers, submissions of returns and transitory provisions, listing of equity shares, scheme of amalgamation, issuance of capital, compliance with regards to shares allotted pursuant to ESOP or any other similar scheme for the benefit of the employees or directors of the insurer. It applies to all insurers (excluding foreign reinsurer's branches) and applicants seeking registration to carry on insurance business.

Footnotes

1. Notification dated March 20, 2024. F. No. IRDAI/Reg/6/200/2024

2. The repealed regulations are IRDAI (Registration of Indian Insurance Companies) Regulations, 2022; IRDAI (Other Forms of Capital) Regulations, 2022; IRDAI (Manner of Assessment of Compensation to Shareholders or Members on Amalgamation) Regulations, 2021; IRDAI (Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance business) Regulations, 2015; IRDAI (Issuance of Capital by Indian Insurance Companies transacting Life Insurance business) Regulations, 2015; IRDAI (Scheme of Amalgamation and Transfer of Life Insurance Business) Regulations, 2013; and IRDAI (Scheme of Amalgamation and Transfer of General Insurance Business) Regulations, 2011.

3. Circular dated May 15, 2024. IRDAI/F&I/CIR/78/5/2024

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