Insurance | January – March 2024
Regulatory Updates
Investments in Infrastructure Debt Funds – NBFC
The Insurance Regulatory and Development Authority of India (“IRDAI“) has, by way of a circular dated 5 January 2024, eased certain regulations on investment by insurance companies in infrastructure debt funds (“IDFs”) of non-banking financial companies (“NBFCs”) (“IDF-NBFC”). Previously, insurers were permitted to obtain case-by-case approval for investment in IDFs. IRDAI has now done away with the requirement for case-by-case approval for IDFs.
Any investments by insurers in IDF-NBFCs shall, however, be subject to the following conditions: (i) IDF-NBFC must be registered with the Reserve Bank of India (“RBI“), (ii) debt securities shall have residual tenure of not less than 5 years, (iii) a minimum credit rating of AA or its equivalent by a credit rating agency registered with the Securities and Exchange Board of India (“SEBI“) shall be eligible for approved investments, and (iv) exposure norms as per Note 3 of Regulation 9 of the IRDAI (Investment) Regulations, 2016 shall be applicable.
IRDAI (Expenses of Management, including Commission of Insurers) Regulations, 2024
The IRDAI, has by way of a circular dated 22 January 2024 issued the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024 (“EoM Regulations”), providing a consolidated framework to govern expenses of management including commissions, by insurers. The EoM Regulations replace the IRDAI (Expenses of Management of Insurers transacting General or Health Insurance Business) Regulations, 2023, IRDAI (Expenses of Management of Insurers transacting Life Insurance Business) Regulations, 2023, and IRDAI (Payment of Commission) Regulations, 2023 (collectively, “2023 Regulations”), which consisted of a product-based commissions regime.
The EoM Regulations closely align with the 2023 Regulations in terms of expenses of management, commission limits, compliance obligations, and reporting requirements and consolidate the 2023 Regulations.
Denotification of Arbitration Clause
The IRDAI had by way of a circular dated 4 December 2006, and pursuant to the withdrawal of tariffs by the Tariff Advisory Committee, stated that the tariff general regulations (except the regulations relating to rating), terms, conditions, clauses, warranties, policy and endorsement wordings which were applicable to certain classes of businesses such as fire, engineering, motor, workmen’s compensation and other classes of insurances which were then under tariffs would continue to be followed until further orders.
The IRDAI has now, by way of a circular dated 22 January 2024, stated that the arbitration clause related provisions in the tariff general regulations, terms, conditions, clauses, warranties, policy, add-ons, endorsement wordings and proposal form applicable to risks of insurance business governed by the erstwhile tariffs stand de-notified with effect from 28 October 2023. Further, with effect from 27 October 2023, the said arbitration clause in insurance risks contracts shall be subject to the circular issued by the IRDAI in this regard and amended from time to time.
IRDAI (Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India) Regulations, 2024
The IRDAI notified the IRDAI (Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India) Regulations, 2024 (“Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India Regulations”) on 23 March 2024 with the aim to promote the growth of the reinsurance market and streamline the regulations for reinsurers in the country. The Registration and Operations of Foreign Reinsurers Branches & Lloyd’s India Regulations repeal the: (i) IRDAI (Lloyd’s India) Regulations, 2016 and (ii) IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd’s) Regulations, 2015. The Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India Regulations consolidate the requirements for registration of foreign reinsurer branches, syndicates, and service companies of Lloyds India, including the procedure to be followed for registration in each afore-mentioned category, actions which may be taken the IRDAI in case of any default, and other operational matters. The Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India Regulations also provide that the branch offices of foreign reinsurers who are granted the certificate of registration by the IRDAI shall ensure that the specified minimum requirements in relation to operation are complied with at all times. The branch offices shall be required to submit the necessary approval of their board of directors or the executive committee of their management (duly delegated by the board), as the case maybe to the IRDAI.
IRDAI (Protection of Policyholders’ Interests, Operations and Allied Matters of Insurers) Regulations, 2024
The IRDAI notified the IRDAI (Protection of Policyholders’ Interests, Operations and Allied Matters of Insurers) Regulations, 2024 (“Protection of Policyholders’ Regulations”) on 22 March 2024. The Protection of Policyholders’ Regulations are applicable to all insurers and distribution channels except for those engaged in the reinsurance business exclusively. The Protection of Policyholders’ Regulations provides that the following regulations shall be repealed: (i) The IRDAI (Manner of Receipt of Premium) Regulations, 2002, (ii) The IRDAI (Places of Business) Regulations, 2015, (iii) The IRDAI (Fee for registering cancellation or change of nomination) Regulations, 2015, (iv) The IRDAI (Fee for granting written acknowledgement of receipt of Notice of Assignment or Transfer) Regulations, 2015, (v) The IRDAI (Issuance of e-Insurance Policies) Regulations, 2016, (vi) IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017, (vii) The IRDAI (Protection of Policyholders’ Interests) Regulations, 2017 and (viii) The IRDAI (Insurance Advertisements and Disclosure) Regulations, 2021.
The Protection of Policyholders’ Regulations set out the norms in relation to sale of insurance policies, payment and refund of premium, nomination and assignment, servicing of policyholders, grievance redressal, operations and allied matters of the insurers and outsourcing of activities by Insurers. Further, the Protection of Policyholders’ Regulations also provides the principles in relation to issuance of insurance policies in electronic form. All insurers are required to issue insurance policies only in electronic form with effect from 1 April 2024.
IRDAI (Rural, Social Sector and Motor Third Party Obligations) Regulations, 2024
The IRDAI notified the IRDAI (Rural, Social Sector and Motor Third Party Obligations) Regulations, 2024 (“Rural, Social Sector and Motor Third Party Obligations Regulations”) on 1 April 2024. The Rural, Social Sector and Motor Third Party Obligations Regulations have repealed the following: (i) Insurance Regulatory and Development Authority of India (Obligation of Insurer to Rural and Social sector) Regulations, 2015 and (ii) Insurance Regulatory and Development Authority of India (Obligation of Insurer in Respect of Motor Third Party Insurance Business Regulations, 2015. The Rural, Social Sector and Motor Third Party Obligations Regulations provides that all insurers (life, general and health) shall ensure that they undertake the minimum rural and social obligations set out by the IRDAI for the specific financial years.
IRDAI (Bima Sugam – Insurance Electronic Marketplace) Regulations, 2024
The IRDAI notified the IRDAI (Bima Sugam – Insurance Electronic Marketplace) Regulations, 2024 (“Bima Sugam Regulations”) on 20 March 2024 for the establishment of a ‘Digital Public Infrastructure called Bima Sugam – Insurance Electronic Marketplace’. The Bima Sugam Regulations provide the regulatory framework for establishment, governance and functioning of the Bima Sugam – Insurance Electronic Marketplace, an online marketplace to provide services to insurance stakeholders. Bima Sugam – Insurance Electronic Marketplace shall be set up as a not-for-profit company. The Bima Sugam Regulations provide the norms in relation to establishment and governance of the not-for-profit company and also the functions, duties and responsibilities of the not-for-profit company and the marketplace. The marketplace shall operate on a self-sustainable revenue model and the consumers shall not be charged for availing the services of the marketplace.
IRDAI (Corporate Governance for Insurers) Regulations, 2024
The IRDAI notified the IRDAI (Corporate Governance for Insurers) Regulations, 2024 on 20 March 2024 (“Corporate Governance Regulations”). The Corporate Governance Regulations provide the framework for insurers to adopt sound and prudent principles and practices for their governance structures and provide norms in relation to, inter alia, constitution of the board of directors of insurers, appointment of key managerial persons, appointment of statutory auditors and other governance requirements. The Corporate Governance Regulations also provide for establishment of certain committees of the board of directors of all insurers (in addition to committees specified by the Companies Act, 2013). Further, all insurers are required to formulate a board approved ‘Stewardship Policy’ which identifies and defines the stewardship responsibilities that the insurer wishes to undertake and how the policy intends to fulfill the responsibilities to enhance the benefits to its policyholders.
IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024
The IRDAI notified the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024 on 20 March 2024 (“Actuarial Regulations”). The Actuarial Regulations have repealed the following regulations: (i) IRDAI (Actuarial Report and Abstract for Life Insurance Business) Regulations, 2016 and subsequent amendments, (ii) IRDAI (Distributions of Surplus) Regulations, 2002, (iii) IRDAI (Assets, Liabilities and Solvency Margin of Life Insurance Business) Regulations, 2016, (iv) IRDAI (Assets, Liabilities and Solvency Margin of General Insurance Business) Regulations, 2016 and subsequent amendments, (v) IRDAI (Appointed Actuary) Regulations, 2022, (vi) IRDAI (Investment) Regulations, 2016, (vii) IRDAI (Preparation of Financial Statements and Auditors’ Report of Insurance Companies) Regulations, 2002 and subsequent amendments, (viii) IRDAI (Inspection and Fee for Supply of Copies of Returns) Regulations, 2015 and (ix) IRDAI (Loans or Temporary Advances to Full Time Employees of the Insurers) Regulations, 2016.
The Actuarial Regulations inter alia provide the principles governing the actuarial, finance and investment functions of insurers, the procedure for appointment of an appointed actuary, powers and obligations of appointed actuary, valuation of insurance businesses and also the norms in relation to maintaining solvency margin. The Actuarial Regulations also provide the procedure for preparation of actuarial reports and the formats for the same.
IRDAI (Insurance Products) Regulations, 2024
The IRDAI notified the IRDAI (Insurance Products) Regulations, 2024 on 20 March 2024 (“Product Regulations”). The Product Regulations have repealed the following regulations: (i) IRDAI (Micro Insurance) Regulations, 2015, (ii) IRDAI (Minimum Limits for Annuities and other benefits) Regulations, 2015, (iii) IRDAI (Acquisition of Surrender and Paid up values) Regulations, 2015, (iv) IRDAI (Health Insurance) Regulations, 2016, (v) IRDAI (Unit Linked Insurance Products) Regulations, 2019 and (vi) IRDAI (Non-Linked Insurance Products) Regulations, 2019.
The Product Regulations, inter alia, provide the principles in relation to product development, pricing and design and also set out certain specific principles applicable to life insurance products, general insurance products and health insurance products.
IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024
The IRDAI notified the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024 on 20 March 2024 (“Registration Regulations”). The Registration Regulations have repealed the following regulations: (i) Insurance Regulatory and Development Authority of India (Registration of Indian Insurance Companies) Regulations, 2022, (ii) Insurance Regulatory and Development Authority of India (Other Forms of Capital) Regulations, 2022, (iii) Insurance Regulatory and Development Authority of India (Manner of Assessment of Compensation to Shareholders or Members on Amalgamation) Regulations, 2021, (iv) Insurance Regulatory and Development Authority of India (Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance business) Regulations, 2015, (v) Insurance Regulatory and Development Authority of India (Issuance of Capital by Indian Insurance Companies transacting Life Insurance business) Regulations, 2015, (vi) Insurance Regulatory and Development Authority (Scheme of Amalgamation and Transfer of Life Insurance Business) Regulations, 2013 and (vii) Insurance Regulatory and Development Authority (Scheme of Amalgamation and Transfer of General Insurance Business) Regulations, 2011. The Registration Regulations provide the norms in relation to, inter alia, registration of insurers, capital structure of insurers, listing of equity shares of insurers on stock exchange, amalgamation and transfer of insurance business and issuance of other forms of capital by insurers. The regulations in relation to capital structure, inter alia, provide the lock-in period for shareholders of insurers, the fit and proper criteria, minimum paid-up equity capital, norms in relation to classification as ‘investor’ or ‘promoter’, criteria for investment by private equity funds and the manner of calculation of equity capital held by foreign promoter and foreign investor.
For more information contact:
Shubhangi Pathak
Practice Head – Insurance
shubhangi.pathak@veritaslegal.in
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