The IRDAI issued a press release on 26 April 2022 wherein they stated that with the objective of ensuring ease of doing business in the insurance sector, for both global and domestic investors, they have taken a major step in setting out a new mechanism for processing the requests and applications for registration of new insurance companies under the IRDAI (Registration of Indian Insurance Companies) Regulations 2000 ("Registration Regulations"). The new process would bring down the turnaround time for incorporation of a new entity for insurance related activities and for grant of Certificate of Registration to commence insurance business.

Currently, a company proposing to undertake insurance business in India is presently required to be registered with the IRDAI by way of a three-step process in accordance with the Registration Regulations. The company applying ("Applicant Company") is required to follow the registration procedure prescribed under the Registration Regulations:

  1. File the IRDAI/R1 application with the IRDAI1 , which, inter alia, includes details of the applicant company's share capital, shareholders ie, promoters (including their experience and present occupation) and investors (including their qualifications, experience and present occupation)2 . The IRDAI/R1 application appears to be aimed, primarily, at seeking information to better understand the background of the promoters and investors such that the regulator can undertake the fit and proper checks deemed necessary.
  2. Post approval of the IRDAI/R1 application, the Applicant Company is required to file the IRDAI/R2 application with the IRDAI3 , which, inter alia, includes details such as capital as specified by the IRDAI4 , nature of insurance products proposed to be offered, the level of actuarial, accounting and other professional expertise within the management of the Applicant Company in addition to its organizational structure. We understand that at this stage, the Applicant Company is also required to show evidence of funds to ensure that the minimum capital requirements are met.
  3. When the R2 application is approved, the Certificate of Registration is granted per Form IRDAI/R3 by the IRDAI5

An entity is required to maintain a minimum capital of Rs.100 crores in order to conduct insurance business in India6 and for the companies engaged in reinsurance business, the minimum requirement is Rs. 200 crores7.

Structure of an Insurance Company

Typically, until now, there are two prevalent structures for setting up of an Indian insurance company, ie, (i) traditional joint ventures; and (ii) special purpose vehicles ("SPV") where the Indian insurance company is set up as a wholly owned subsidiary in accordance with the IRDAI (Investment by Private Equity Funds in Indian Insurance Companies) Guidelines 2017 ("PE Guidelines").

  1. Joint Venture: A joint venture is typically preferred by companies where the shareholders/investors are directly invested into the Indian insurance company. For such entities, foreign investment in an Indian insurance company can be up to a maximum limit of 74%, and Indian investors may hold shares in the Indian insurance company subject to a cap of 10% for each Indian investor and 25% jointly for all Indian investors.
  2. SPV: The PE Guidelines were introduced to enable private equity funds to invest in the capacity of promoters in an Indian insurance company through an SPV, subject to certain specified conditions. The foreign investment cap continues to be 74% for this route as well.

Board Composition

The application process for registration requires substantial details about the qualifications and professional background of the top management of the Applicant Company. Per the Insurance Companies (Foreign Investment) Amendment Rules 2021 ("Amendment Rules"), inter alia, (a) the majority of Directors on the Board of the Indian insurance company are required to be resident Indian citizens; (b) majority of key management persons are required to be resident Indian citizens; and (c) at least one among the chairperson of its Board, its managing director and its Chief Executive Officer is required to be a resident Indian citizen.

Other Conditions

In this context, the Amendment Rules also further stipulate conditions where foreign investment in an Indian insurance company exceeds 49%, such as (a) at least 50% of the net profit is required to be retained in general reserves, for a financial year in which: (i) dividend is paid on equity shares and (ii) at any time the solvency margin is less than 1.2 times the control level of solvency; and (b) at least 50% of its Directors are required to be Independent Directors, unless the chairperson of the Board is an Independent Director, in which case at least one-third of its Board shall comprise of Independent Directors.

IRDAI's 2022 Reforms

In March 2022, with the new IRDAI chairman, Mr Debashish Panda taking charge, a number of press releases were issued on the continuing objectives and reforms proposed to, inter alia, ensure increase of penetration of insurance in the country, healthy growth of the insurance industry and rationalization of the regulatory framework.

To give effect to this, as indicated above, in its recent press release of 26 April 2022, the IRADI has taken a major step in proposing a new mechanism for processing requests and applications for registration of new insurance companies in order to ease the process for registration of new Indian insurance companies in India. Currently, the process for setting up and registration of an Indian insurance company in India is a three-step process as described above. The objective of the proposed new process is expected to bring down the current turnaround time of c.12-14 months for incorporation and grant of Certificate of Registration to commence insurance business in India.

Concluding Remarks

The proposed rehaul of the existing process is also in line with the IRDAI's objective of "India@100 – Insurance for all" and can be anticipated to not only promote ease of doing business in the insurance sector but may also in our view enable and encourage new entities to enter the insurance market in India with special outreach to global investors, in turn enhancing FDI into the insurance sector.

The market is avidly looking forward to the new amendments to the registration process in the coming months. The proposed reduced timelines in the registration process and perhaps an easier approval route is a space to watch. While the new process norms are yet to be issued and it remains to be seen how the existing process will shape the future of investors and new players in the insurance market, there appears to be a distinct trend to promote the ease of doing business in India while allowing new and niche players to enter the insurance market.


1. R3(1) of the Registration Regulations.

2. R3 read with Form IRDAI/R1 (Requisition for Registration Application) of the Registration Regulations.

3. R3(5) and R10 of the Registration Regulations.

4. R10 read with Form IRDAI/R2 (Application for Registration) of the Registration Regulations.

5. R16 of the Registration Regulations.

6. R10(2)(a) of the Registration Regulations.

7. R10(2)(b) of the Registration Regulations.

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