IRDA Compliance for Insurance Companies

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IRDA Compliance for Insurance Companies- An Overview

Businesses set up in India require following several compliances under different laws. Apart from compliance, companies have to file annual returns and filings which are prescribed by the government. Businesses have to be registered with several authorities to follow several compliances. An insurance business is established initially as a company. The business has to be registered with the Registrar of Companies (ROC). Apart from this, once the insurance business begins operations, there would be various compliances under different laws and regulations.

IRDA Compliance for Insurance Companies is required to be followed by all insurance companies. An insurance company that specializes in life insurance or general insurance would have different compliances based on the regulatory norms related to insurance. IRDA compliance for insurance companies is required for a company to operate in the field of insurance.

Why is IRDA Compliance for Insurance Companies Required?

IRDA compliance for Insurance companies is required so that the company can follow the rules and bye-laws which are laid down by the authority. Apart from this, IRDAI compliance is required for the following reasons:

  • To ensure that the insurance company is registered as per the requirements of the authority.
  • To settle claims and grievances related to policyholders.
  • To ensure that the insurance companies act in the best interests of policyholders.
  • To ensure that there is a proper system of monitoring insurance companies.
  • Foreign exchange is allowed in insurance. Compliance with the rules related to FEMA would ensure that the company is following procedures.

Who Regulates IRDA Compliance for Insurance Companies?

The primary regulatory authority for the IRDA compliance for insurance companies in India is the Insurance Regulatory and Development Authority of India  (IRDAI). The law related to insurance is present under the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act 1999.

Apart from this, there are different regulatory authorities and laws that insurance companies have to be compliant with. IRDA Compliance for insurance companies comes under the following authorities:

For setting up a company, the compliance would be under the Companies Act 2013 and previous company law. The insurance company would have to deal with the ministry of corporate affairs (MCA) and the Registrar of Companies (ROC) for setting up a company.

Foreign Exchange Management Compliance- The insurance company would have to comply with the laws related to Foreign Exchange Management Act 1999 (FEMA). Foreign exchange management regulations are developed by the Reserve Bank of India (RBI).

E-commerce compliance for insurance companies are regulated by the Insurance E-Commerce Business/ Internet Guidelines (IRDA/ INT/ GDL/ ECM/ 055/03/ 2017)- Guidelines as per section 34 of the Insurance Act, 1938 and Section 14 of the IRDA Act 1999.

Eligibility criteria- IRDA Compliance for Insurance Companies

The company which wants to conduct the business of insurance must be established as a company under the companies act.

  • The insurance company has to be registered as a public company under the Companies Act 2013.
  • The company has to be compliant with Insurance Laws and Insurance Act for being registered with the IRDAI and has the minimum capital requirements.

a) Minimum Capital Requirements for an Insurance Company- 100 Crores.

b) Minimum Capital Requirements for Reinsurance Company- 200 Crores.

  • Insurance Laws Compliance

a) File Annual Reports.

  • FEMA Compliance

a) Reporting amount of inward inflow and outward inflow that occurs in an Insurance company having a specific amount of foreign investment.

  • E-Commerce Compliance by an Insurance Company

a) The insurance business must register as an e-Commerce company when dealing with internet insurance.

b) The company must ensure that the website is according to the guidelines as per issued by the IRDAI.

c) The company must ensure that the price of the products complies with the IRDAI.

d) The Company must ensure that all policyholders are provided with information on the website.

Process / Procedure for IRDA Compliance for Insurance Companies

There are different IRDA compliance for insurance companies. The following have to be considered by an insurance company.

Setting up of an Insurance Company and Corporate Governance Norms

  • The company must incorporate as a public company under the CA 2013 or previous company law.
  • Insurance Company needs to be registered as a public company under the Companies Act or Previous company law.
  • Filing of resolutions to the Ministry of Corporate Affairs, the declaration from directors, appointment of directors and auditors, annual filings are requied to be followed by companies.
  • Insurance companies registered under this Act are required to file numerous board resolutions related to topics such as resignation or appointment of directors, appointment of auditors, problems related to shares, etc. with the ROC.
  • The filing of the balance sheet in XBRL is exempted from the insurance company. Also, the annual return they file in AOC-4, and MGT-7 needs to be filed within 60 days of the AGM (Annual General Meeting)
  • Corporate Governance Guidelines is another provision that is issued by the IRDAI for the insurance companies. The company is required to strictly follow the regulations and also should strictly abide by the rules prescribed in these guidelines while forming the committees. 

E-Commerce – Internet Compliance for Insurance Company

  • The applicant has to set up an independent ISNP (Insurance Self Network Platform).
  • Prior permission is required from the authority to set up such a platform.
  • Application must be made in Form-ISNP-1 to set up an internet e-commerce platform in India to conduct e-Commerce activities.
  • The applicant has to pay a non-refundable fee of Rs 10,000.
  • The application form has to fill with details as per the requirements, and the authority will return within 15 days.
  • The authority would give the permission to secure the license.

Conditions taken by the authority before granting permission

  • The interests of the policyholders will be taken into consideration.
  • Before granting permission, the authority will see the prospects of internet-based insurance activities.
  • The company must not have breached guidelines issued by the authority.
  • The applicant does not violate the provisions of the Insurance Act, 1938, IRDA Act, 1999, insurance Rules, Regulations Guidelines, circulars, orders, notices, etc. issued by the authority.

Compliance under Insurance Regulatory and Development Authority / Audit

Insurance companies have to file the following reports:

  • Quarterly Reports;
  • Monthly reports;
  • Annual Reports;
  • Monthly informational reports of policy grievances, business information. This would also apply to quarterly reports; and
  • The insurance company are required to put forth their overall performance and which involves the risks related topics and how they deal with particular risks along with the details of the policyholder and management details.

Insurance companies have to maintain a solvency margin ratio regularly and must prepare their accounts according to the prescribed authority.

An essential requirement of the company is that the annual return must be filed in four copies within six months to the authorities from the end of the financial year.  In case if the business is carried outside India, this period is slightly extended by three months. It is a must that this annual report contains the signatures of the principal officer, two directors, and the chairman.

Reports of Businesses outside India

For those insurers who have their business established outside India need to file four certified copies to the authority in the English language for each of the balance sheet, account, statement, abstract and report.

In addition to this, the statement that an auditor or a qualified person audited under the law of insurer's country should be supplied, which indicates the information of all the assets possessed by the insurer in India itself as per the date stated in any of the balance sheets.

They have to supply a separate abstract of the valuation report to the authority before the due date is prescribed.

Compliance Requirements under FEMA

These provisions are specially designed and imposed for those insurance companies that possess foreign investments or have foreign promoters. They must abide by the guidelines as prescribed by the FEMA.

It is mandatory for the insurance companies coming under FEMA to produce an annual report that is filed following the provisions prescribed and within the specified period to the RBI. Thus, as per the laws formulated for various insurance companies, these companies must abide by the provisions of these guidelines for smoother working of the organization.

Insurance companies have specific requirements related to foreign equity holding. Foreign investors are allowed to invest in insurance companies. Foreign Direct Investment is allowed in the insurance sectors. There is a specific compliance for outward investment and inward investment related to an insurance company.

Documents for IRDA Compliance for Insurance Companies

Internet/E-commerce Insurance Business- IRDA Compliance for Insurance Companies

  • Form - ISNP – 1.
  • KYC Documents.
  • Fee
  • Application form.

Company Law Documentation- IRDA Compliance for Insurance Companies

  • Identity Proof such as Aadhaar card, PAN card, Driving License, Voter Id of all the designated directors, and shareholders.
  • Address Proof of all the proposed directors and shareholders of the company.
  • PAN card details of all the directors and shareholders.
  • Utility bills such as telephone, gas, water, or electricity bill of the registered office are residential proof of the business place. It should not be older than two months.
  • A NOC or No Objection Certificate from the landlord of the business place.
  • DIN or Directors Identification Number of all the designated directors.
  • DSC or Digital Signature Certificate of the designated directors.
  • Memorandum of Association (MOA) and Article of Association (AOA).

IRDAI Documentation- IRDA Compliance for Insurance Companies

  • Evidence of Capital for an Insurance Business- that is equity capital of 100 crores.
  • Evidence of Capital for a Reinsurance Business- that is the equity capital of 200 crores.
  • Name and address of the directors.
  • Qualifications of the directors.
  • Certified Copy of the Prospectus.
  • A statement indicating the distinctive numbers of shares issued to each promoter and shareholder with respect to the applicant's share capital.
  • Any other additional information.

How can Enterslice help in IRDA Compliance for Insurance Companies?

  • We will assist your insurance company in being compliant with all rules related to IRDAI.
  • We monitor and track the status of the application on behalf of the client.
  • We value your time and money.
  • We also offer post engagement services for IRDA Compliance for Insurance Companies.

Frequently Asked Questions

Yes, an insurance company must follow the above compliances. However, compliance depends on the business requirement of the insurance company. A company that does not have any form of foreign holding or foreign investment would not have to deal with compliances under FEMA.

Yes, there are specific compliances which have to be followed by all insurance companies, including the intermediaries, corporate agencies, marketers, and brokers. A company wanting to start an insurance brokering business would have the compliances related to forming a company. Similarly, a company starting a corporate agency would also have similar compliances associated with forming a company.

All over India, 17 ombudsmen address grievances related to insurance.

The types of insurance companies are:

• Life Insurance or Personal Insurance.

• Property Insurance.

• Marine Insurance.

• Fire Insurance.

• Liability Insurance.

• Guarantee Insurance.

• Social Insurance.

The functions of IRDAI are as follows:

• Issuing certificate of registration.

• Protecting the interest of policyholders.

• Issuing license to agents.

• Specifying the code of conduct for surveyors and loss assessors.

• Promoting efficiency in the insurance business.

• Undertaking inspection, conducting inquiries on insurance companies.

There are different penalties and consequences for non-compliance with insurance regulations.

For non-compliance with authority- The authority can impose a penalty on the company and civil consequences for the directors to not comply with the laws related to the authority.

Non-Compliance with Companies 2013 will attract punishments for the company and the directors of the company.

Similarly, Non-Compliance with FEMA Regulations would attract severe penalties, which will be enforced by the RBI and authorized dealer.

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