IRDAI Registration
The Insurance Regulatory and Development Authority of India (IRDAI) comprehensively governs insurance companies in India, regulating every facet, including registration, operation, corporate governance, audit, finances, etc. Insurance companies seeking IRDAI approvals must abide by pre-registration compliances and a standardized procedure before kickstarting operations. This blog sheds light on the registration aspects of these firms, detailing every legality, guideline, and document that matters. So, let’s get started with IRDAI registration formalities without any further ado.
What is The Significance of IRDAI Registration?
Securing IRDAI’s registration is not just an essential legal step; it is an extensive approach to reinforcing transparency, inclusivity, and legitimacy. Despite being a mandate, IRDAI registration allows insurance companies to embrace a legally robust framework that enables them to operate within a stringent yet controlled environment.
Since insurance is a compliance-intensive sector, it invites a host of compliances formulated by the IRDAI, spanning every aspect, including registration, operation, customer support, claim settlement, audit, etc. Among key compliances include the IRDAI registration that is mandatory for every insurance firm regardless of category and market reach.
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Which Companies Stand Eligible To Apply For IRDAI Registration?
Following are the categories of insurance businesses eligible to apply for IRDAI registration.
- Life Insurance
- General Insurance
- Standalone Health Insurance
- Reinsurance
- Other Businesses
Step-by-Step Process For Securing IRDAI Registration
1. No Objection Certificate (NOC)
Obtaining a No Objection Certificate (NOC) is the first step in this process of IRDAI registration. NOC will serve as permission to leap into the insurance sector and use terms like “insurance,” “assurance,” or “reinsurance” in the company name. It is worth noting the NOC shall remain valid for six months with a potential of 3 months extension granted under specific scenarios.
2. Filing Form IRDAI/R1
Filing a prescribed application viz. Form IRDAI/R1 is the next step in the process. Once done filling, sharing the following documents as annexure alongside the application is mandatory:
- Proof of incorporation, including the Certificate of Incorporation (for companies) or a Certificate of Registration (for cooperative societies).
- Certified copies of founding/charter dossiers such as Memorandum and Articles of Association, detailing objectives, management hierarchy, the onus of key officials, etc.
- Financial statements concerning promoters for the past five years, highlighting their creditworthiness.
- A detailed five-year business plan detailing projections for the market penetration, solvency margins, premiums, etc. The plan must be certified by a qualified actuary.
The IRDAI shall profoundly vet the submission against underlying guidelines for accuracy and compliance. Based on the assessment, they can either reject or approve the application, providing the applicant with valid reasons. The approval shall stay valid for a 3-month timeline, which can be extended to another 3 months if required upon request.
3. Filing Form IRDAI/R2
As soon as the validity R1’s validity ends, the application must share the prescribed application viz. Form IRDAI/R2, prompting an authority to render approval for operation. When seeking R2 approval, keep the following considerations in mind:
- Evidence affirming the compliances under Section 6 of the Insurance Act, 1938 for maintaining equity capital.
- Actuarial certifications reflect that the existing insurance products are legitimate and render value to the customers.
- Details of the company’s management structure, including directors, executives, and their roles.
- Proof of payment for the Rs. 5 lakh non-refundable processing fee.
The IRDAI shall assess these checklists alongside other key factors to ensure compliance. If required, an applicant may be prompted to render information or clarification. The applicant must ensure a timely response to avoid unnecessary delays.
Compliance and Eligibility Criteria
1. Shareholding and Capital
- At least 50% of the paid-up equity capital of the insurance company should be held by all promoters collectively.
- The company’s shareholding structure must abide by the norms cited in Regulation 5 of the IRDAI Registration Guidelines.
2. Solvency and Financial Requirements
- Insurance companies must have a required solvency ratio (recommended by IRDAI) to seamlessly address claims. The apt solvency ratio signifies that the company has ample capital to fulfill operational and compliance needs.
- Promoters must ensure that the company’s finances are intact and hence it can unhesitantly address risks, expenditures, and regulatory capital norms.
3. Lock-In Period for Promoters
Promoters and investors must keep their equity share under their possession with no transfer for at least 5 months as a part of a mandate. This timeline is referred to as the lock-in period. If any shareholder departs within this timeline, securing IRDAI approval becomes mandatory.
Licensing and Issuance of Certificates
Certificate of Registration (Form IRDAI/R3)
Upon fulfilling the above requirements, the authority will issue the Certificate of Registration (Form IRDAI/R3). The entity must begin its operations within a year of registration as a part of a mandate, ensuring compliance with the IRDAI framework.
Common Grounds for Rejection
Since IRDAI follows a strict framework for assessing registration documents, the possibility of rejections may come to light if:
- Forms are incomplete or lack mandatory dossiers.
- The applicant fails to meet the conditions under the Insurance Act, of 1938.
- The proposed shareholding structure violates IRDAI regulations.
Once rejected, the applicant firm cannot apply for IRDAI registration for two subsequent years as per the governing legislation. Therefore, it is vital to zero in all the legalities contributing to the registration process.
Norms Concerning Foreign Investments in Insurance Companies
Foreign investment in Indian insurance companies is allowed provided the following conditions are met:
- The investment cannot surpass the underlying threshold, which is 74% of the paid-up capital.
- The majority of Key Management Persons and directors should be Indian.
- Among all the board members, one should be an Indian national.
- Pricing guidelines specified by RBI under the 17[Foreign Exchange Management Act, 1999 (42 of 1999)] are met.
Appeals and Redressal Mechanisms
Applicant rejection is not the end of the road for the applicant. If the applicant firmly believes that the rejection is baseless, they can appeal to the Securities Appellate Tribunal (SAT). Make sure to timely file the appeal attached with evidence detailing a rational explanation.
Conclusion
Securing IRDAI registration is the first step in formalizing an insurance company. Since the compliances for insurance companies are strict, an extra emphasis should be given to legalities to stay atop possibilities of rejection or prolonged delays. If dealing with compliances is not something you do frequently, connect with a reliable partner like Adviso. Being a renowned firm, Adviso sits at the forefront of IRDAI license advisory, offering services that matter.
Also Read: IRDAI Corporate Agents Regulations: A Comprehensive Guide
