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The registration of Indian Insurance companies is a complex process. It requires the entity to make the application in the required format under the IRDAI (Registration of Indian Insurance Companies) Regulations, 2022. Any company willing to enter the market must comply with specific compliance requirements in accordance with the relevant rules and regulations. Similarly, the company willing to enter into the insurance market must undertake specific compliance requirements as per the guidelines on the registration of Indian Insurance companies. The article will discuss the compliance requirements for the registration of Indian Insurance Companies.
The compliance requirements under the guidelines for registration of Indian Insurance Companies require that the applicant’s equity share shall be a lock-in for the period in the following manner:
|Investment||In the capacity of||Lock-in period|
|At the time or before the grant of the R3 certificate ( Certificate of registration)||Promoter or Investor||5 years from the date of granting the R3 certificate|
|During 5 years after the grant of R3 certificate due to change in the shareholding pattern||Promoter or Investor||The following period, whichever is earlier: 5 years from the investment Date8 years from the date of grating R3 certificate|
|After 5 years but before 10 years after the grant of R3 certificate due to change in the shareholding pattern||Promoter or investor||For promoter, whichever is earlier: 3 years from the investment date12 years from the date of granting R3 certificate For an investor, whichever is earlier: 2 years from the Investment Date 11 years from the date of granting the R3 certificate.|
|After 10 years of the grant of R3 certificate due to change in the shareholding pattern||Promoter or Investor||For promoters, the period shall be 2 years from the investment date. For an investor, the period shall be 1 year from the Investment.|
However, the authority may relax the lock-in period in case the insurer is willing to list its shares on the stock exchanges in India.
The applicant willing to obtain a certificate of registration shall meet the fit & proper criteria, which will be applicable to its promoters and investors. Further, it is also required that they remain Fit & Proper even after the grant of the registration certificate. The authority will assess them based on the factors enumerated below:
If the applicant is promoted by a Special Purpose Vehicle, it is required that the specific compliance requirements of registration of Indian insurance companies shall be fulfilled:
If an operating company promotes the applicant, it is required that the said promoter be subject to the following due diligence compliance requirements:
It is required that all the promoters of the insurer shall collectively hold a minimum of 50 % shares in the paid-up equity capital of the insurer. However, the said requirements can be diluted and the shareholding can go below 50% but not below 25% of the paid-up equity capital of the insurer provided the following conditions are fulfilled:
The compliance requirements under the guidelines for registration of Indian Insurance Companies require an insurer to comply with the following conditions while making any investment in the capacity of an investor, whether directly or indirectly:
The compliance requirements under the guidelines for registration of Indian insurance companies require the following conditions of Investment by the insurer in a respective manner:
The compliance requirements under the guidelines for registration of Indian Insurance Companies shall require that the Investment shall also comply with the following:
1. Investment must be made from own funds, not borrowed ones.
2. The limits will be applied at the group level in case if any of the group entities or body corporate under the same management has invested in the insurer.
3. Section 6A (4) (b) of the Insurance act 1938 should apply to creating a pledge or any other kind of encumbrance over shares of an insurer.
4. If the Investment by an entity is in more than one insurer, in that case, the following condition shall be fulfilled:
According to the compliance requirement under the guidelines for registration of Indian Insurance Companies, the private equity funds are allowed to invest in the insurer as promoter or investor. Further, the proposed limit in respect of future capital requirements must be as per the limits specified in the placement memorandum or charter documents. The private equity funds are allowed to invest in any insurer as a promoter if they meet the following conditions:
The compliance requirement for the transfer of Shares requires that the registration of transfer of Shares or equity capital cannot be made, which results in the exchange in the shareholding in the situations:
However, such transfer can be registered after approval from the authority in a specified manner.
The IRDAI compliance requirements under the new regulation on the Registration of Indian Insurance Companies require that certain requirements are to be met by the applicant while making an application to the authority. There shall be a lock-in period of the company’s equity share for a required period of time which will ensure that the company’s solvency remains even after the grant of certificates. Further, the promoter or investor shall meet the fit & proper criteria to meet the requirement under the guidelines. Henceforth, the compliance requirement is to be met by the applicant as per the guidelines on the registration of Indian Insurance Companies issued by the IRDAI.
Read our Article: Procedure for Registration of Indian Insurance Companies under IRDAI Regulations