IRDAI Proposes Insurance Regulation Overhaul To Boost Investment, Ease Compliance

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a wide-ranging set of amendments covering insurer registration, capital structure, share transfers and amalgamations, with the goal of building a more transparent and growth-oriented insurance sector.

The proposals come against the backdrop of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, which among other changes permitted 100% foreign direct investment in insurance.

The regulator has invited comments from insurers, promoters, investors, professional bodies, legal experts and other stakeholders by 6 July 2026.

Following the announcement, insurance stocks traded higher on 16 June 2026.

As of 11:56 AM, Life Insurance Corporation of India shares gained 0.68% to ₹408.45. SBI Life Insurance Company shares rose 0.45% to ₹1,767.41, while HDFC Life Insurance Company shares fell by 1.32% at ₹573.50.

Changes To Promoter And SPV Definitions

The consultation paper also suggests changes to the definitions of foreign promoter, Indian promoter and special purpose vehicle (SPV). The aim is to remove grey areas in the existing rules and improve regulatory oversight, especially after the increase in the foreign direct investment (FDI) limit.

Under the existing framework, SPVs are permitted to act as promoters. The new proposal requires applicants to justify why an SPV structure is necessary, while also extending SPV recognition to foreign-incorporated entities based in jurisdictions compliant with the Financial Action Task Force framework.

Framework For Amalgamation With Non-Insurance Entities

Since the SBSR Act now allows insurers to amalgamate with non-insurance companies, the regulator has proposed a dedicated framework covering which non-insurance entities are eligible, the conditions under which amalgamation can proceed, how consideration should be paid, and safeguards to protect policyholder interests after the amalgamation.

Lower Fees Across The Board

IRDAI has proposed substantial fee reductions to ease compliance costs. The processing fee for amalgamation applications, currently set at one-tenth of gross premium with a minimum of ₹50 lakh and a maximum of ₹5 crore per insurer, would be replaced with a flat fee of ₹10 lakh per transacting party.

Similarly, the fee for share transfer applications involving more than 50% of an insurer's equity would drop to ₹10 lakh from ₹50 lakh.

New Rules On Insurer Names

The SBSR Act has introduced a requirement that insurer names include the term insurance, assurance or reinsurance. To give effect to this, IRDAI has proposed a new regulation specifically governing insurer names, along with a transition period for existing insurers to comply and a requirement for prior regulatory approval before any name change.

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Other Proposed Changes

The regulator has proposed clarifications on approval requirements for renunciation in rights issues, with approval needed on every 5 percentage point increase in shareholding. A new processing fee has been proposed for applications seeking a no-objection certificate and restructured provisions governing insurer naming conventions, to formalise application procedures and improve regulatory clarity.

As per IRDAI, the overall objective of these amendments is to align the regulatory framework with the revised provisions of the Insurance Act 1938, reduce compliance ambiguities and create conditions that facilitate capital infusion into the sector while continuing to protect policyholder interests.

Sources:

CNBC TV18

The Hindu