In order to meet its vision of ‘Insurance for All’ by 2047, the Insurance Regulatory and Development Authority of India (Irdai) has announced several measures to create a progressive environment for insurance distribution while offering enhanced flexibility to the insurers.
Private equity (PE) funds can now directly invest in insurance companies instead of the earlier scheme of investing via special purpose vehicle (SPV), thereby providing more flexibility. Further, the shareholding limit of a single investor for the purpose of treating as a promoter has been increased to 25% of the paid up capital v/s the earlier limit of 10% for individual investor/ 25% collectively.
In addition, a new provision has been introduced to allow the promoters to dilute their stakes up to 26%, subject to condition that the insurer has satisfactory solvency record for preceding five years and is a listed entity. Further, the lock-in period for investors and promoters has been stipulated on the basis of age of the insurer.
This will enable ICICI Bank to reduce its stake in ICICI Lombard to 30% from 48% under the RBI Regulations, by making a strategic sale to either one single PE investor or group of investors.
The maximum number of tie ups for Corporate Agents (CA) and Insurance Marketing Firms (IMF) has been increased to nine and six, respectively, from three and two earlier for all life, general and health insurers.
IRDA has been successively announcing measures to create a supportive environment to improve insurance penetration and promote the ease of doing business for the insurers. The latest measures announced by the IRDA provide more flexibility to insurers to raise both debt and equity capital to fund business growth while the solvency requirements have also been lowered. The rise in distribution tie-up limits to nine/six insurers for CA and IMF renders more freedom to intermediaries; however, may not really change things until IRDA also limits the proportion of business that an insurer can underwrite via a single partner. Among life insurers we prefer SBI Life while on General Insurance side we prefer ICICI Lombard.