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The IRDAI notified the Exposure Draft on IRDAI (Registration of Indian Insurance Companies) Regulations 2022 on 13th October 2022, which aims at providing the fit and proper criteria, limits of investment in insurers, lock-in period on investment in insurers, simplification of the process of registration of insurance companies and criteria for investment by Private Equity Funds.
The article discusses the key aspects of this notification to help the insurers and other relevant persons to have better clarity about the same.
Table of Contents
The following businesses come under the permissible classes of Insurance Business
(i) Life insurance
(ii) General Insurance
(iii) Health insurance business exclusively.
(iv) Reinsurance business.
(v) Any other classes as specified by IRDAI
An applicant must make a requisition for registration application only for the classes of insurance business mentioned above.
The Disqualifications for Promoter / Applicant are discussed below –
The applicant would be disqualified due to the following reasons
Rejection of the requisition of application by the IRDAI or withdrawal by the applicants at any time during the five financial yrs preceding the date of making such an application
The below-mentioned persons are not eligible to be the promoter of the applicant.
The applicant is required to follow the below-mentioned procedure for the registration of Indian Insurance Companies.
Any company containing the name, such as insurance, reinsurance or assurance, cannot be incorporated without obtaining a NOC from the IRDAI; therefore, the applicant is required to file an application for the NOC in the prescribed format.
The validity of such NOC is 6 months, and the applicant must file an application for issuance of registration application Form IRDAI/R1 within such time, extendable to 3 more months by the chairperson upon providing the reasons for the same.
IRDAI shall issue the registration application Form IRDAI/R1 after the examination of the matters and being satisfied with the relevancy of the same, the validity of which shall be 3 months within which the applicant must duly fill and submit the registration form IRDAI/R1 for further consideration by the authority.
The application must be made in the prescribed format, along with the submission of the following documents.
The application for registration shall be scrutinized on the parameters prescribed per the regulations.
The chairperson of the authority shall grant the R1 approval after being satisfied with the adequacy and accuracy of the application form and the documents and other conditions as specified in the approval letter, along with the issue of the IRDAI/R2 form.
The applicant must submit the below-mentioned documents along with the application form.
After the processing of the R2 application but before its approval by the Authority, the applicant must ensure to submit the following documents.
Further, the authority shall consider the other relevant parameters prescribed in the regulation while scrutinizing the application form.
The chairperson of the authority shall grant the registration certificate upon the fulfilment of the prescribed criteria.
The applicant can commence the insurance business within 12 months from the date of grant of the registration certificate; otherwise can seek an extension for the same by a written application to the authority stating the reasons for such delay in commencement of business which must not exceed 24 months.
The authority can reject the application after providing a reasonable opportunity of presenting the matter to the applicant. The rejection can be due to the following reasons
The reason for the rejection must be communicated to the applicant within 30 days, stating the grounds for rejection. Such rejection shall make the applicant disentitled to the registration certificate.
IRDAI can even ask the applicant to furnish additional documents or clarification regarding the relevant matters for consideration of the application at any stage of the registration process.
IRDAI reserves the right to impose any conditions deemed fit by the authority regarding the grant of NOC, R1, R2 or the Registration certificate.
If an applicant is unsatisfied with the decision of the IRDAI at any stage under these regulations, he may file an appeal before SAT within a time frame of 30 days from the date of the decision being communicated.
The lock-in period of the equity shares of a company on the date of the grant of the certificate is discussed below –
In case the applicant is promoted by a Special Purpose Vehicle or a (NOFHC), the following conditions shall be complied with:
The private equity funds can invest in an applicant as a promoter or investor in the manner specified under these Regulations.
Investment in the insurer, including the proposed limit in respect of the future capital requirement of the insurer, must be according to the Private Equity Fund’s strategy mentioned in its placement memorandum provided to its investors or its charter documents.
A PE Fund may invest in any insurer in capacity of “promoter” only if it meets following criteria:
a. The PE Fund or its Parent Fund has completed 10 years of operation;
b. The funds raised by PE Fund, including its group entity(ies) is USD 500 million or more (or its equivalent in INR);
c. The investible funds available with PE Fund are not less than USD 100 million;
d. The PE Fund has invested in financial sector in India or other jurisdictions.
The calculation shall be made as under and shall be the aggregate of:-
The quantum of paid-up equity share capital held by Foreign Investor(s) and Foreign Promoter(s), which includes foreign venture capital investors in the applicant company
The proportion of the paid-up equity share capital held or controlled by such foreign investor(s) either by itself or through its subsidiary companies in Indian promoter(s) or Indian Investor(s) as mentioned in sub-clause (i) of this Regulation.
After the grant of Registration Certificate u/s 3 of the Act, the applicant must make the payment of an annual fee for every FY to the Authority before the 31st day of January of the preceding financial year, which would be
a. Ten lakh rupees
b. 1/20 of 1% of total gross premium written directly by an insurer in India during the FY preceding the year in which the annual fee must be paid, or rupees ten crores, whichever is less.
The duplicate certificate would be issued by the authority upon filing an application by the insurer to the authority in Form IRDAI/R4.and on receipt of a fee of Rs. 1 lakh.
The certificate of registration can be cancelled or suspended either voluntarily by the applicant or by the authority.
The insurer must note the following pointers.
The notification meticulously discusses the procedure for the Registration of Indian Insurance Companies along with all the aspects associated with the same, which can help to smoothen the whole process and encourage the Indian insurance companies to get them registered at the earliest.
Read Our Article: Role of Insurance Broker in Indian Insurance Sector
Shubhangi has completed her B. A.LLB (H) with specialization in Business Laws from Amity University. She is particularly interested in legal research and writing and wishes to utilize her knowledge to create informative legal content. She has prior experience in corporate and criminal litigation and has great drafting skills. She has also published various research papers in reputed journals.
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