Insurance regulator IRDAI on Friday approved a series of reforms, including easing entry rules and lowering solvency margins, which will open up Rs 3,500 crore capital to insurers.
The latest decisions are aimed at increasing the penetration of insurance in the country and ensuring “Insurance for All by 2047”.
The Insurance Regulatory and Development Authority of India (IRDAI) at its board meeting also approved a proposal to allow private equity (PE) funds to invest directly in insurance companies.
In addition, the supervisory authority allowed subsidiaries to be patrons of insurance companies.
According to a statement released by IRDAI, one person investing up to 25 percent of paid-in capital and 50 percent for all investors collectively will be considered an “investor” in insurance companies. Investments beyond this will only be considered as a “promoter”.
Previously, the threshold was 10% for individual investors and 25% for all investors collectively.
IRDAI said a new provision has been introduced allowing founders to dilute their stake to 26%, provided the insurer has a satisfactory solvency record for the previous 5 years and is a registered entity.
“The amendments to the rules regarding the registration of Indian insurance companies are aimed at facilitating the conduct of business and simplifying the process of establishing an insurance company in India,” IRDAI said in a statement.
To provide policyholders with greater choice and access to insurance, the maximum number of associations for corporate agents (CAs) and insurance marketing firms (IMFs) has been increased.
“Now the CA can team up with 9 insurers (previously 3 insurers) and the IMF can link up with 6 insurers (previously 2 insurers) for each life, general and medical business to distribute its insurance products.” – said IRDA.
In order to allow general insurers to use their capital efficiently, solvency ratios related to crop insurance have been lowered to 0.50 from 0.70, which will reduce capital requirements for insurers by about Rs 1,460 crore.
In the case of life insurers, solvency ratios for Unit Linked Business (without guarantees) were reduced to 0.60% from 0.80% and for PMJJBY to 0.05% from 0.10%. This will provide a reduction in capital requirements of around Rs 2,000 crore, IRDAI said.
PMJJBY is Pradhan Mantri Jeevan Jyoti Bima Yojana.
According to the statement, the regulator has committed to include “Insurance for All” by 2047.
To achieve this goal, efforts are being made to create a progressive regulatory architecture to create an enabling and competitive environment leading to greater choice, accessibility and affordability for policyholders, he added.