Overview of IRDA Insurance Company License

The insurance business in India is governed by the Indian Insurance Regulatory and Development Authority (IRDA), set up under the Insurance Regulatory and Development Authority Act 1999. The primary functions of the IRDA are to supervise the orderly growth, stability and protection of the insurance consumer. To get IRDA Insurance Company License, the entities must fulfil some conditions and complete the IRDA/R1 form. An applicant is subject to certain restrictions, an arduous process that serves to preserve the insurance industry, its stability and solvency. These measures help limit the possibility of only companies capable of offering insurance services in the country.

The insurance industry falls under three categories: life insurance, non-life insurance, and reinsurance. At the same time, life insurance concentrates on events that may include but are not limited to death, disability, retirement pension, and other plans for the policyholder's dependents or family. It is mainly associated with health, property, motor vehicles, and travel, which are completely different risk hazards. In contrast, reinsurance helps ensure that insurance companies are capable of handling each of these kinds of risks due to the sharing of risks. Insurance companies and insurance immediately need licensing and registration through the accommodation provided by the Indian Insurance Regulatory Authority (IRDA) in its Registration of Indian Insurance Companies (Seventh Amendment) Regulation, 2016, in order to maintain solidity and reliable standards for entry to the market and operation.

Who Regulates Insurance Company License in India?

• Insurance Regulatory and Development Authority of India (IRDAI).
• Companies Act of 2013 (the Companies Act) / Companies Act of 1956.
• IRDA (Registration of Indian Insurance Companies) Regulations 2000 (the Registration Regulations).
• IRDAI (Reinsurance) Regulations 2018 (the Reinsurance Regulations).
• Any additional pertinent regulations that govern the acquisition of an Insurance License in India.

Eligibility criteria for commencing Insurance business in India

• Entities Eligible to Obtain an IRDAI License

a) Basically, it is any company that has been registered and accredited by the Insurance Regulatory and Development Authority of India (IRDAI).

b) Only those entities of Limited Liability Partnership (LLP) registered under the LLP Act of 2008.

c) Any insurer that was doing business before the Act's underlying applicable came into force, provided that the foreign company cannot own more than 26% of the paid-up capital of the insurer.

• Requirements for LLP Incorporation

The registered name of the LLP must include the words "insurance marketing firm".

• Capital Requirements

a) For an insurance business: The minimum capital required is ₹100 crores.

b) For a reinsurance business: The minimum capital required is ₹200 crores.

• Other Eligibility Criteria

a) The applicant must ensure that no prior application for starting an insurance business has been rejected within the last five years.

b) The IRDAI certificate must not have been previously cancelled or revoked.

c) The business name must contain the words "insurance company".

• Foreign Equity Investment

If the equity investment involves a foreign company or Non-Resident Indian (NRI), the foreign entity may hold a maximum of 26% of the total equity.

• For Banking Companies

Banking companies wishing to enter the insurance business must first obtain permission from the Reserve Bank of India (RBI).

Documents required for gettingInsurance Company License

• Proof of Capital:

a) Equity capital of ₹100 crores for an insurance business.

b) Equity capital of ₹200 crores for a reinsurance business.

• Details of Directors:

a) Names and addresses of the directors.

b) Qualifications of the directors.

• Business Documentation:

a) A certified copy of the Prospectus.

b) A statement detailing the distinctive numbers of shares allocated to each promoter and shareholder concerning the applicant's share capital.

c) A certified copy of the standard forms utilized by the insurer, along with statements regarding the assured rates, benefits, terms, and conditions associated with the insurance policies.

d) For life insurance businesses, a certificate from an actuary confirming that the rates, benefits, terms, and conditions are viable and sound.

• Fees and Compliance:

a) The original receipt shows the payment of a fee of fifty thousand rupees for the designated class of business.

b) A certificate from a practising chartered accountant or a practising company secretary confirming that the applicant has complied with all requirements related to registration fees, share capital, deposits, and other provisions of the Act.

• Supplementary Information:

Any supplementary information requested by the authority during the application processing for registration.

Procedure for getting an Insurance Company License

• Submission of IRDA/R1 Form:

a) The applicant submits the IRDA/R1 form to the Insurance Regulatory and Development Authority (IRDA) to initiate the registration process.

b) The applicant must be a public limited company as per the Companies Act.

c) Separate registration is required for life insurance and general insurance businesses.

d) Required documents include a Memorandum of Association, directors' details, declaration of intended insurance business, and sources of share capital.

• IRDA Approval and IRDA/R2 Form:

a) Upon acceptance of the IRDA/R1 application, the IRDA/R2 form is issued to the applicant so that the applicant can proceed with further registration.

b) The IRDA/R2 application must include proof of deposit, evidence of minimum paid-up equity capital (₹100 crores for insurance, ₹200 crores for reinsurance), affidavits, Prospectus, standard policy forms, and other supporting documents.

c) A fee of ₹50,000 per class of business must be paid.

• Commencement of Operations:

a) Once the IRDA verifies and approves the application, it issues the IRDA/R3 certificate, allowing the applicant to start insurance operations within a 12-month period.

b) If the application is deemed unsatisfactory, it will be rejected, and the applicant will receive a notification outlining the reasons for the rejection within 30 days.

c) The applicant has the right to appeal the rejection to the Securities Appellate Tribunal within 30 days of receiving the rejection notice.

d) If the applicant cannot begin operations within the 12-month timeframe, they must request an extension from the IRDA before the initial period ends.

When can an applicant become ineligible to submit an IRDA/R1 application?

• In the case that the authority denies your registration application.
• If either foreign or Indian investors decide to withdraw from the project for any reason within the two fiscal years preceding the date of the registration application.
• If, during the same two fiscal years, the authority has either rejected the registration application or the applicant has withdrawn for any reason, the aforementioned conditions will apply.

Suspension or cancellation of Insurance Company License

The Insurance company license may be suspended or cancelled on the following grounds:

• Noncompliance with protocols for assessing benefits and liabilities.
• Insurer classified as extinguished or undergoing liquidation.
• Transfer, assignment, or merger of the insurer's enterprise without IRDAI approval.
• Failure to adhere to the Act, rules, regulations, directives, or orders issued by the IRDAI.
• Unsettled claims for more than 3 months after the court decision.
• Engaging in activities unrelated to insurance or advisory services.
• Lack of consent required by relevant Acts (Companies Act, General Insurance Act, FEMA, PMLA).

Procedure for Renewal of Insurance Company License

• Form IRDA/R5 is used for submitting insurance license renewal applications.
• Renewal application must be submitted before the end of the calendar year.
• Required documents for renewal:
• A fee of ₹50,000 per type of insurance.
• 0.1% of the total gross premiums collected in the previous fiscal year, or a minimum of ₹5 crores, whichever is lower.
• If the company does not renew by December 31, the authority will still accept the application. Late payments will incur a 10% penalty on the amount due, which will be deposited into the IRDAI's account at the Reserve Bank of India.

Duplicate Certificate

The IRDAI has the power to issue a duplicate certificate to insurance companies. To get IRDA Insurance Company License, the applicant must submit an application in accordance with IRDA/R4 and pay a fee of Rs 5000/.

How Whizseed can help you?

• By partnering with Whizseed, clients can eliminate delays and swiftly launch their insurance operations, all while minimizing the internal resources and expenses involved.
• Whizseed is well-known for its effective insurance licensing services, boasting a history of happy clients.
• Our team of legal and regulatory experts offers thorough guidance on eligibility requirements, necessary documentation, and detailed processes for securing an IRDAI license.
• Even after the license is obtained, Whizseed continues to offer support to ensure compliance with IRDAI regulations.