IRDA License

Procedure for Registration of Indian Insurance Companies under IRDAI Regulations

Registration of Indian Insurance Companies

The IRDAI or Insurance Regulatory & Development Authority of India, is a regulatory body that governs the insurance industry in India. It frames policies and procedures that may require the insurers to follow to comply with disclosure and reporting requirements under the relevant guidelines. The present article will define one such requirement, which will discuss the procedure for the registration of Indian Insurance Companies under regulation IRDAI (Registration of Indian Insurance Companies) Regulations, 2022. The regulation IRDAI (Registration Of Indian Insurance Companies) Regulation 2022 is a new regulation issued on 5th December 2022 to promote the growth of the insurance sector by simplifying the registration process and promoting ease of doing business.

Requirement of No-Objection Certificate

The first step in the process of registration of Indian Insurance Companies will require the company or co-operative society to obtain a No-objection Certificate before incorporating in India with the name ‘Insurance’ or ‘ assurance’ or ‘reinsurance’. The applicant will be issued the no-objection certificate from the authority upon request by making an application in the specified format.

Validity of the Certificate: The NOC shall be valid for 6 months, within which the application is required to make a registration application. However, the period of such NOC may be extended for 3 Months.

R1 Approval

The second step in the process for registration of Indian Insurance Companies includes applying for requisition of registration by making an application before the authority for issuance of Form IRDAI/R1. The authority will examine the application for the applicant and, upon satisfaction, issue the Form IRDAI/R1, which will be valid for 3 months and within which the applicant is required to submit the duly filled Form IRDAI/R1 before the authority. Such a period may be extended by the authority for a further period of 3 months.

Accompanying Documents: Every application for registration of Indian Insurance Companies shall be accompanied by the following documents:

  1. Certificate of Incorporation issued by ROC or Registration certificate of Co-operative society.
  2. Certified copy of MOA and AOA.
  3. Certificate of bye-laws in case of a co-operative society.
  4. Name, address and occupation of promoter’s directors or applicant
  5. Certified copy of shareholder’s agreement
  6. Approved projection of business for 5 years along with a certificate from fellow actuary that the projections are reasonable & workable.
  7. Proof of payment of Rs 5 lakh is applicable in processing Form IRDAI/R1.

Additional measures taken by authority: The authority shall take into account the following matters:

  1. General Task record of conduct & performance of promoters and investors in the field of business or profession they are engaged.
  2. Record of conduct & performance of directors and persons in management of promoters, investors and applicants.
  3. The financial strength of the investors, promoters and applicant
  4. The capital structure of the investors, promoters and applicant.
  5. Source of meeting the capital requirements
  6. Shareholding pattern of promoters and applicants.
  7. The ability of the applicant and its promoter to fulfil the obligation of providing life insurance or general insurance or health insurance in the rural sector, works in an unorganised sector or informal sector, economically vulnerable or backward classes of the society.
  8. Ability to underwrite insurance business in third-party risks of motor vehicles
  9. The planned infrastructure of the applicant.
  10. Proposed business plan for 5 succeeding years, including establishing a place of business in rural areas.
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Approval by authority: The authority’s chairperson will issue the “R1” certificate upon examining the application and satisfaction. In addition to the approval, the authority will issue Form IRDAI/R2 to the applicant.

Validity period: The ‘R1’ approval shall be effective for 3 months from the approval date, within which the applicant shall file duly filled form IRDAI/R2[1]. However, the said period may be extended by the chairperson for a further period of 3 months.

R2 approval

The third step in the process of registration of Indian Insurance companies will include filing of registration application in Form IRDAI/R2.

Accompanying Documents: The Form IRDA/R2 shall be accompanied by the following documents:

  1. Affidavit from the applicant and promoters signifying that the paid up share capital of the applicant after reducing the preliminary expenses is adequate as per Section 6 of the Insurance act 1938. 
  2. Statement signifying the shareholding pattern of the applicant on the application date.
  3. Affidavit from MD or CEO or WTD of the promoters and investors of the applicant certifying that the foreign paid-up equity capital is calculated as per Indian Insurance Companies (Foreign Investment) Rules 2015 and it does not exceed 74% of the total paid-up capital of the applicant.
  4. Affidavit Form co-operative society if the foreign capital holding as per Section 2(8A) (c) of the Insurance act 1938 is not more than 26% of the total capital of the applicant. 
  5. Affidavit from the MD or CEO or WTD and promoter of applicant certifying the condition imposed by the authority are compiled in case the applicant has a foreign investment.
  6. Affidavit from MD or CEO or WTD and the promoters of the applicant in case the foreign investment exceeds 49%.
  7. Certified copy of standards forms of applicant
  8. Statements of assured rates, terms and conditions, advantages to be offered in case of insurance policies along with a certificate from an actuary in case of life insurance business that such rates and terms and conditions and rates are sound and reasonable. 
  9. Certified copy of MoU or Management Agreement or shareholder’s agreement or voting rights agreement or any agreement entered between the promoters and investors, including copies of support or comfort letters.
  10. Certificate from CA or CS certifying that all the requirements regarding registration fees, share capital, and foreign investment comply with regulations.
  11. Proof of payment of Rs 5 lakh towards the processing of Form
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Completion of processing but before approval by authority: The applicant shall before approval by the authority, but after completion of the processing Form IRDAI/R2 needs to submit the following documents:

  • Evidence signifying the receiving of equity share application money by the applicant and the meeting of conditions for R1 approval.
  • Affidavit from investors or promoters or applicant certifying that upon grant of certificate, the above application money will be converted into paid-up equity share capital.

Additional measures taken by authority: The authority shall take into account the following matters including:

  1. Nature of insurance products offered by the applicant
  2. Level of actuarial, accounting and professional expertise in the management
  3. Organisational structure of the applicant
  4. Application is eligible and able to meet the obligations imposed by the authority
  5. The financial condition and the general character of the management are sound
  6. The capital structure and the earning prospectus of the applicant are adequate.
  7. The interest of the general public will be served if the registration certificate is granted.

Approval by the authority: The authority, after examining the application will issue the “R2” approval to the applicant for the registration of Indian Insurance companies.

Grant of Certificate of Registration

The fourth step in the process for registration of Indian Insurance companies will include granting a Registration Certificate to the authority. The authority examines the applicant’s details and may register the applicant as an insurer. The chairperson of the authority will grant the Registration certificate to the applicant in Form IRDAI/R3, provided that the following conditions are satisfied:

  1. The applicant and its investor or promoter are “Fit & Proper” on a continuous basis.
  2. The lock-in period on the shareholding of the promoter and investor is from the date of the granting the registration certificate.
  3. The promoter and investor should not create any encumbrance on the equity shares over the lock-in period.
  4. The applicant’s shareholders can create an encumbrance on the equity shares of the insurer subject to prior written approval by the authority.
  5. The applicant and promoter shall be bound by all the conditions specified in Form IRDAI/R3.
  6. Evidence of allotment of shares to promoters and investors be furnished within 15 days by the applicant.
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Commencement of Insurance business

The fifth step in the process of registration of Indian Insurance companies will include the commencement of the insurance business. The applicant granted the registration certificate should commence its business within 12 months from the date of granting the registration certificate. If the applicant does not commence business within 12 months, the certificate of registration will not be valid after the expiry of said period.

Extension of period: The applicant can seek an extension of the time limit through a written application if it cannot commence the business within the stipulated time period of 12 months. The application for extension shall be accompanied by the reason in writing for not commencing the business within the stipulated time.

However, it is pertinent to mention that the authority should only extend the time limit to 24 months from the date of granting the registration certificate.

Rejection of Application

The sixth step in the process of registration of Indian Insurance Companies is the rejection of the application by the authority. The authority, after giving an opportunity of being heard by the applicant, may reject the application in the following cases:

  1. Application is Incomplete
  2. Requirements under the regulation are not fulfilled
  3. Any other reasons

Communication of rejection: The authority, through order in writing, shall reject the application of the applicant. Further, it shall be communicated to the applicant within 30 days of such rejection.

Moreover, if the application for registration is rejected at any stage, then, in that case, the applicant should not be entitled to a certificate of registration.

Appeal to Securities Appellate Tribunal (SAT)

The last step in the process of registration of Indian Insurance Companies is to appeal to the Securities Appellate tribunal. The applicant, being aggrieved by order of the authority, can appeal to the Securities Appellate Tribunal at any stage of the registration process.

Conclusion

The IRDAI has provided a streamline procedure for the entities willing to register themselves as insurance companies in India. It is pertinent to mention that company making an application shall have to obtain a No Objection Certificate before using the suffix “Insurance”, “assurance”, or “reinsurance” before incorporating the company in India. This will ensure that no company can be incorporated in India that will undertake any insurance-related activities without the authority’s approval. Further, before making any application for registration of Indian Insurance Companies, the applicant has to make a requisition for request in the first instance and then apply for the registration in the R2 from approval.

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