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JSA Insurance Law Newsletter | January to March 2025 Edition

This edition of the newsletter captures the key regulatory developments in the Indian insurance sector between January – March 2025. The Insurance Regulatory and Development Authority of India (“IRDAI”) has introduced various measures in the first quarter of 2025, focused on supporting innovation in the sector, protection of the policyholders’ interest, improving the governance framework and data security.

In the 9^th edition of Bima Manthan[1] (i.e., the quarterly meeting of IRDAI with the CEOs of insurers), IRDAI focused on the developmental agenda and digital transformation as the regulator remains dedicated to building a transparent, inclusive, and policyholder-centric insurance ecosystem, driving progress towards ‘Insurance for All by 2047’. The key highlights from the 2 (two) day long Bima Manthan included:

stock taking of the performance of the industry;
discussions on strategies to reach the last mile;
strengthening risk management efforts by use of necessary risk mitigation tools;
strengthening financial position and need for insurers to have a roadmap for listing;
need for timely and transparent public disclosures on insurer’s websites and adherence to regulatory stipulations;
leveraging technology and encouraging innovation by utilising the Regulatory Sandbox[2] environment; and
roll out of State Insurance Plan, distribution reforms as well as detailed deliberations for phased launch of Bima Trinity – comprising of Bima Sugam, Bima Vahak and Bima Visataar.

Further, IRDAI issued a press release on January 10, 2025, stating that as a part of the comprehensive review of regulatory framework ‘to maintain an agile, progressive, and forward-looking regulatory framework’, it had issued 9 (nine) principle-based regulations till March 2024. To strengthen the regulatory architecture and in line with IRDAI’s broader move towards a principle-based efficient regulatory framework, the following new regulations/amendments to the existing regulations are notified:

IRDAI (Regulatory Sandbox) Regulations 2025;
IRDAI (Maintenance of Information by the Regulated Entities and Sharing of Information by the Authority) Regulations 2025; and
The following regulations have been amended:
IRDAI (Meetings)(Amendment) Regulations, 2025;
IRDAI (Insurance Advisory Committee) (Amendment) Regulations, 2025; and
IRDAI (Re-Insurance Advisory Committee) (Amendment) Regulations, 2025.

These new regulations/amendments aim to drive sustainable growth, improve efficiency in operations and uphold policyholder protection in the dynamic insurance landscape and have also been discussed further in this newsletter.

Re-enactment of regulations concerning maintenance of records and sharing of confidential information

IRDAI, vide notification dated January 3, 2025, has issued the IRDAI (Maintenance of Information by the Regulated Entities and Sharing of Information by the Authority) Regulations, 2025 (“Information Regulations”)[3] to enable:

IRDAI to share information judiciously considering the principles of confidentiality including consent, disclosure, security, rights and interests of the stakeholders who provide such information to IRDAI;
insurers to maintain data as required for its operations in electronic form, ensure security as well as compliance with applicable laws and adopt an established data governance framework; and
insurers and intermediaries (including insurance intermediaries) to maintain all basic, necessary and relevant data and information to enable the investigating officer appointed by IRDAI to investigate or inspect the affairs of any insurer or intermediaries (including insurance intermediaries) and report to IRDAI on any such investigation.

The Information Regulations have consolidated and repealed the following regulations:

IRDAI (Sharing of Confidential Information Concerning Domestic or Foreign Entity) Regulations, 2012;
IRDAI (Maintenance of Insurance Records) Regulations, 2015; and
IRDAI (Minimum Information Required for Investigation and Inspection) Regulations, 2020.

The Information Regulations mandate electronic record-keeping with robust security and privacy measures and require Regulated Entities[4] to adopt data governance framework and implement board approved policies for record maintenance.

The key features under the Information Regulations are as below:

Sharing of confidential information by IRDAI:
- information sought by a Requesting Entity[5] from IRDAI about a Requested Entity[6] has been categorised as:
  - information available in public domain of either IRDAI or Regulated Entities or Requested Entities or any statutory/ public body; or
  - information not available in public domain, but available with IRDAI;
- IRDAI may share details of the applicable public domains, if such information is available in the public domain. In respect of information available with IRDAI, IRDAI may consider the disclosure of information to the Requesting Entity only if a written request is made, applicable law permits sharing of information, the Requested Entity is informed, and their prior written consent is obtained and the Requesting Entity undertakes that such information is required for lawful performance of duties. Further, information not available in the public domain will be considered on merit and assessed for its shareability. Such assessment will be guided inter-alia by considerations, such as, nature of information sought, convincing reasons for request, principles and maintenance of confidentiality of information sought. IRDAI reserves the right not to share any information which could potentially affect the stability of its Regulated Entity or the insurance sector as a whole or to protect the public or policyholder’s interest;
- if it is necessary to share any information provided by a Foreign Entity[7] or a Requested Entity with any law enforcement or regulatory authority, IRDAI must notify the Requested Entity promptly and obtain its prior consent and ensure that each recipient agrees to maintain the confidentiality of the information provided; and
- where confidential information provided is subject to a legally enforceable request, IRDAI would notify the Requested Entity before complying with the demand and would use all reasonable legal means to resist such a demand or protect confidentiality of information if consent is not provided by the Requested Entity.
Maintenance of insurance records: Insurers (which includes a foreign reinsurer branch) are required to maintain a record of every policy issued and record of every claim made (as per the Insurance Act) and inter alia ensure that such records are complete, accurate and are maintained in electronic form. All such records pertaining to all policies issued and all claims made in India must be held in data centres located and maintained only in India. This requirement also applies in respect of records collected by insurers carrying on solely reinsurance business. Insurers are required to have a board approved policy on manner and maintenance of records and must ensure that the records are organised in the manner required for business use and easy retrieval.
Minimum information for investigation and inspection:
- insurers, intermediaries and insurance intermediaries are required to maintain all records and information required to be maintained by them as per applicable law as applicable to their businesses as well as certain specified information (which includes, in case of insurers, records of proposals for insurance, covers notes issued, policies, premium, endorsements, bank guarantees and deposits, claims and in case of intermediaries/insurance intermediaries, records of employees, policies solicited, claims serviced/surveyed, grievances and complaints) at their principal place of business in India. If is not practicable to maintain such information in full detail at the principal place of business, such information may be maintained in a manner that the branches/offices maintain only the relevant information applicable to its working or in data centres located and maintained in India;
- the information, documents and data maintained should be reconciled with the audited financials, wherever relevant, and requirements under other applicable law. Such information must be maintained in electronic form and access to such information will be given to persons designated by IRDAI in case of investigations and inspections; and
- insurers, intermediaries and insurance intermediaries are required to put in place a board approved policy on maintenance of records and destruction of old records. These records, except those pertaining to settled claims (which are to be retained as per specified timelines), must be maintained for a minimum period of 10 (ten) years as per the applicable legal requirements, whichever is later:
  - from the date of last transaction on the respective records; or
  - from the date of expiry of the policy.

Re-enactment of regulations concerning the Regulatory Sandbox framework

IRDAI, vide notification dated January 3, 2025, has issued the IRDAI (Regulatory Sandbox) Regulations, 2025 (“Sandbox Regulations”)[8], to promote and facilitate innovation, adaptability and operational efficiency and ease of doing business in the insurance sector while ensuring orderly development of the sector and for protection of policyholders’ interest. The Sandbox Regulations repeal the IRDAI (Regulatory Sandbox) Regulations, 2019 and aim at further strengthening the Regulatory Sandbox framework whereby relevant provisions of any of the existing regulations framed by IRDAI may be relaxed for a limited scope and limited duration, if necessary, during the experiment period.

The new Sandbox Regulations are more of principal-based whereby operational aspects (such as eligibility criteria of applicants, parameters for experimentation stage and liabilities/responsibilities of the applicant, duration of the experimentation period and extension period) will be addressed through a master circular.

Some of the key provisions of the Sandbox Regulations inter alia include:

Categories of application: Applicants (which may include insurers, intermediaries, an individual having prescribed minimum net-worth, other specified persons) may apply to the competent authority (i.e., chairperson or a whole time member/committee of whole-time members of officers as are determined by the chairperson) for promoting or implementing innovation in insurance in India across the insurance value chain (previously, this was limited to categories such as insurance solicitation and distribution, insurance products, underwriting, policy and claims servicing) and in any area that requires relaxation of any provision of the regulations, notification, master circular, guidelines, circular, etc. issued by the IRDAI, except those pertaining to prudential and financial condition/stability matters (such as capital, liquidity, investment, solvency). However, no relaxations would be granted for compliance with the Insurance Act, the Insurance Regulatory and Development Authority Act, 1999 (“IRDA Act”) or other applicable statutes.
Conditions for grant of permission: The competent authority may grant permission if applicant meets the eligibility criteria and if the application promotes innovation beneficial to the insurance sector which is either in the interest of policyholders or conducive for growth of the industry or would increase insurance penetration or would bring in efficiency in, or promote ease of doing, insurance business[9]. The permission may also be revoked (after providing an opportunity to be heard) if the above conditions are not met or the Insurance Act, IRDA Act, etc. are being violated.
Experimental period and extension: The permission would be granted for a specified time (previously, this was specified as up to 36 (thirty-six) months) and an applicant may seek an extension of the experimental period from the competent authority (citing reasons for the extension) which may be granted for a specified period (previously, this was specified as a period not exceeding 12 (twelve) months).
Review and conclusion: The competent authority (through a single point of contact) would review the progress and may guide the applicant in the form of suggestions. Upon completion of the allocated time period, the applicant must submit a report to the competent authority on how the proposal met the objectives, policyholders’ feedback, etc. along with a plan of action as to how the proposal may be brought under the extant regulatory framework. If the competent authority is satisfied that the objectives of the proposal have been met, it may grant permission for the proposal to be included in the extant regulatory framework. If not, then the proposal may be directed to be discontinued. Early termination may also be requested by the applicant if it is felt that the proposal will not be able to meet the desired objectives.
Inter-Regulatory Sandbox proposals: A key addition under the Sandbox Regulations is an enabling provision to file Inter-Regulatory Sandbox proposals, cutting across more than one financial sector. The process and procedures in dealing with such applications would be specified by the competent authority.

Obligatory cession for the financial year 2025-26

IRDAI, vide notification dated February 27, 2025, has notified[10] the percentage cession of the sum insured on each general insurance policy which is to be reinsured with the Indian re-insurer(s) as 4% in respect of insurance attaching during the financial year beginning from April 1, 2025, to March 31, 2026, except the terrorism premium and premium ceded to Nuclear pool (which would be ‘NIL’). The entire obligatory cession is to be placed only with General Insurance Corporation of India .

The percentage of commission on obligatory cession for different classes of business is defined as follows:

minimum 5% for motor third-party and oil and energy insurance;
minimum 10% for group health insurance;
minimum 7.50% for crop insurance;
average terms for aviation insurance; and
minimum 15% for all other classes of insurance business.

Commission over and above, can be as mutually agreed between Indian re-insurer(s) and the ceding insurer.

Further, the Indian re-insurer must share the profit commission, on 50:50 basis, with the ceding insurer based on the performance and surplus of the total obligatory portfolio of the ceding insurer, after factoring the following:

incurred loss % (to be worked at the end of 3 (three) financial years);
management expenses at 2%;
profit at 5%; and
commission at 12.5%.

Cyber incident and crisis preparedness

IRDAI, vide circular dated March 24, 2025[11], has reiterated that all Regulated Entities must strictly comply with the provisions of IRDAI Information and Cyber Security Guidelines, 2023 dated April 24, 2023 (“Cyber Security Guidelines”) on cyber incident/crisis preparedness to ensure effective readiness. Some of the key provisions of the Cyber Security Guidelines discussed, are as below:

reporting of any cyber incidents to IRDAI in prescribed format within 6 (six) hours of noticing or being brought to notice about such incident;
maintenance and monitoring of all information and communication technology infrastructure and application logs for a rolling period of 180 (one hundred and eighty) days;
the clocks of all relevant information processing systems within the organisation or security domain being synchronised with the Network Time Protocol (“NTP”) Server of National Informatics Centre or National Physical Laboratory or with NTP Servers traceable to these NTP servers;
documenting of information sharing arrangements in a cyber crisis management plan as a part of organisations response for cyber-attacks;
performance of forensic investigation for severe information security incidents and engagement of certified external forensic experts as and when required; and
adherence to the directions issued by Indian Computer Emergency Response Team (“CERT-In”) from time to time, including relating to incident reporting to the CERT-In as per directions issued by CERT-In in relation to information security practices, procedure, prevention, response, and reporting of cyber incidents for safe and trusted internet.

Further, all Regulated Entities must establish a well-defined procedure/practice to ensure that the forensic auditor(s) are empaneled in advance and can be onboarded to conduct forensics and root cause analysis of cyber incidents without any delay. It must also be ensured that the vendor handling security operation center, attack surface monitoring, red teaming, or conducting the annual assurance audit or any cyber security aspect of Regulated Entities is not engaged as the forensic auditor for the incident to avoid a conflict of interest.

Lastly, all Regulated Entities, including insurance intermediaries, are required to place compliance with the above provisions in their upcoming board meeting and submit the minutes of the meeting to IRDAI for information.

Guidelines permitting insurers to utilise equity derivatives to hedge their equity exposures

IRDAI, vide circular dated February 28, 2025[12], has issued the Guidelines on Hedging through Equity Derivatives (“Hedging Guidelines”) under Clause 13 of Schedule III of the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024, which would allow insurers to use equity derivatives for hedging their existing equity exposures, subject to compliances mentioned in the Hedging Guidelines. These guidelines have been introduced with an objective for insurers to hedge against volatility in equity markets, ensure preservation of market value of equity investments and reduce equity portfolio risk.

Some of the key stipulations/compliances under the Hedging Guidelines are as below:

Insurers are permitted to use the following exchange traded equity derivatives to hedge their existing positions:
- stock futures and index futures: Insurers may take short positions in stock futures and index futures (to the extent of existing holding of underlying equities in the respective funds). The short future positions will be taken within the same fund where the underlying equities are held; and
- stock options and index options: Insurers may take position of an option holder (buyer) (but are allowed to buy only put options of stocks and indices against the existing underlying equity holding in the respective funds). The put options will be purchased within the same fund where the underlying equities are held.
Any over-the-counter exposure to equity derivatives is prohibited;
funds such as unit linked funds which are allowed to invest in equity instruments, life funds, pension annuity and group funds as well as investment assets of general or health insurers will be permitted to use equity derivatives;
the equity derivatives must be used only for hedging purposes, against long positions in equities held by the insurer at the time of taking the derivative position;
the total equity derivative positions in a fund (stock futures, stock options, index futures and index options, all put together) at notional value must not exceed the market value of underlying equities held within the same fund on any day and passive breaches in the said limits must be corrected within 15 (fifteen) days;
before taking exposure to equity derivatives, the board and senior management of an insurer must take note of the nature of the risks undertaken, complexities involved, stress levels, etc. Further, insurers must put in place a board approved hedging policy; have proper information technology policies, process and infrastructure; and undertake regular and periodic audits. A robust corporate governance mechanism must be in place wherein the board and senior management reviews the contracts undertaken at periodic intervals to ensure that adequate risk measurement, management policy, procedures and controls have been established and that the positions taken are not prejudicial to the interest of the policyholders;
all equity derivative contracts must be recognised on the balance sheet and measured at fair value; and
insurers must intimate IRDAI before taking exposure to equity derivatives for the first time and are also required to furnish reports (on a quarterly basis) to IRDAI on total hedging position through equity shares and options, stock futures (short position), stock put options, etc., derivative turnover data, data pertaining to unwinding of equity derivative contracts and profit/loss booked on equity derivative transactions.

Exposure to forward contracts in government securities

Pursuant to the Reserve Bank of India (Forward Contracts in Government Securities) Directions, 2025, IRDAI, vide circular dated March 10, 2025[13], has permitted insurers to undertake transactions in Forward Contracts in Government Securities (“Bond Forwards”) as users for hedging purpose subject to certain conditions, including the following:

insurers must undertake only long positions in Bond Forwards i.e. buying Bond Forwards;
Bond Forwards are not permitted for unit linked insurance plan business;
insurers must comply with the Master Circular on IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024, prescribed for interest rate derivatives, such as:
- conditions of permitted purpose, regulatory exposure and prudential norms;
- documentation requirements, accounting;
- internal risk management policy and process;
- suitability and appropriateness policy;
- corporate governance; and
- chief risk officer’s role and responsibilities.
insurers must report the transactions in the Bond Forwards on a quarterly basis in line with reports stipulated for interest rate forward rate agreements; and
insurers must comply with the Reserve bank of India’s directions issued for Bond Forwards and operational guidelines issued by Fixed Income Money Market and Dealers Association of India, with respect to settlement basis and market conventions, as amended from time to time.

One-time mandate for blocking premium amounts through unified payments interface for issuance of life and health insurance policies

To facilitate smooth transactions of payment of premium and to bring operational ease in meeting the requisite requirements laid down by IRDAI (particularly, those concerning payment of premium only after the insurer communicates decision of acceptance of the proposal and no premium deposit being required to be paid to the insurer along with the proposal form, except in specified cases), a facility of the Unified Payments Interface (“UPI”) One Time Mandate (“OTM”) is permitted for use by insurers. The UPI feature would allow insurers to block funds in the bank accounts of the concerned prospect for specific transactions, ensuring availability of funds while deferring actual payments (BIMA Application Supported by Blocked Amount, “BIMA-ASBA”).[14] The key stipulations in respect of the BIMA-ASBA are as below:

in this facility, insurers can offer OTM for blocking certain amount (with the prospect’s explicit consent in the proposal form and subject to limits specified by the National Payments Corporation of India from time to time) through UPI in the bank account of the concerned prospect until the expiry of a maximum period of 14 (fourteen) days or until the date of the underwriting decision, whichever is earlier, during which time the blocked amount would not be available to prospect for any other use;
the amount blocked towards insurance premium will be debited only after the insurer decides to accept the proposal. In case the insurer does not accept the proposal, the amount will be unblocked and released at the disposal of the prospect within 1 (one) working day or automatically after expiry of 14 (fourteen) days from the date of initial blocking of funds;
insurers are mandated to offer BIMA- ASBA facility to its prospects for life and health insurance policies in addition to other existing options available for premium payment. Availing of the BIMA-ASBA facility is optional, and no proposal can be rejected for the reason that the prospect has not opted for BIMA-ASBA;
if the premium to be charged exceeds the blocked amount, then the insurer can use the facility to modify such mandates through one-time consent/authorisation of the prospect. Such modification would be allowed only once and must be done within the 14 (fourteen) day period from the date of the original mandate. If the premium to be collected is lower than the blocked amount, the insurer must collect only the reduced amount through the facility;
if the BIMA-ASBA is utilised, the risk would commence from the date of acceptance of the proposal irrespective of the debit from the account of the prospect; and
at present, the facility of BIMA-ASBA has been extended to individual policyholders. All insurers were required to go live and offer BIMA-ASBA facility to the prospects on or before March 1, 2025.

Enhancing efficiency in meetings of IRDAI

IRDAI, vide notification dated January 3, 2025, has issued the IRDAI (Meetings)(Amendment) Regulations, 2025[15], amending the IRDAI (Meetings) Regulations, 2000 with an objective to enhance the clarity and efficiency of its meetings. Some of the key amendments are as below:

IRDAI may meet as often as may be considered necessary but must meet generally 4 (four) times in a financial year (previously, this was 4 (four) times in a calendar year);
the chairperson (and in his absence, the senior most full-time member of the IRDAI) may now also decide upon the mode of the meetings of the IRDAI (potentially, to facilitate virtual or hybrid mode meetings as well);
while the notice and agenda for a meeting are required to be circulated 7 (seven) days in advance, shorter notice for meetings is now permitted with approval of the chairperson of the IRDAI;
the chairperson, may, by giving at least 24 (twenty-four) hours’ notice (previously, 48 (forty-eight) hours’ notice was required), convene an emergent meeting of the IRDAI at any time or place to consider any item requiring an urgent decision. Such emergent meetings may similarly be convened on 24 (twenty-four) hours’ notice (as opposed to a 48 (forty-eight) hours’ notice) upon written requisition of one-half of the total strength of the members stating the purpose for which they desire the meeting to be called; and
Further, in case of an emergency, the chairperson may also call for an immediate meeting of the IRDAI.

Enhancing efficiency in functioning of the insurance and reinsurance advisory committees

To enhance the clarity and efficiency in advisory functions of the Insurance Advisory Committee (“IAC”) and Reinsurance Advisory Committee (“RAC”), IRDAI has issued the IRDAI (Insurance Advisory Committee) (Amendment) Regulations, 2025[16] and IRDAI (Reinsurance Advisory Committee) (Amendment) Regulations, 2025[17], amending the IRDAI (Insurance Advisory Committee) Regulations, 2000 and IRDAI (Reinsurance Advisory Committee) Regulations, 2019, respectively. Some of the key amendments are as follows:

the procedures for meetings of the IAC and RAC, each, have been amended to grant more flexibility:
- the IAC may meet as often as may be considered necessary, but must meet generally 2 (two) times in a financial year (previously, it was 2 (two) times in a calendar year), for advising IRDAI on making regulations and on advising on other matters as may be prescribed;
- the chairperson may now also decide upon the mode of the meetings of both, the IAC and RAC (potentially, to facilitate virtual or hybrid mode meetings as well);
- while the notice and agenda for an IAC meeting is required to be circulated 7 (seven) days in advance, shorter notice for meetings is now permitted with approval of the chairperson. Further, emergent meetings may be convened on 24 (twenty-four) hours’ notice (previously, 48 (forty-eight) hours’ notice was required for such meetings).
provisions pertaining to resignation of any member of the IAC and removal of any member of the IAC or RAC from office have been amended, which provides as below:
- any member of the IAC may offer resignation by giving a written notice addressed to the chairperson of IRDAI with resignation taking effect from the date on which it is accepted;
- IRDAI may remove any member of the IAC or RAC on certain grounds. These include the concerned member(s):
  - being adjudged as an insolvent;
  - becoming physically or mentally incapable of acting as a member;
  - being convicted of any offence involving moral turpitude;
  - having acquired financial/other interest as may affect prejudicially his functions as a member;
  - having abused his position as member which renders his continuation as member detrimental to public interest;
  - ceasing to attend 3 (three) consecutive meetings of the committee without sufficient cause; and/or
  - being, in IRDAI’s opinion, no longer fit to remain a member.

Review of revision in premium rates under health insurance policies for senior citizens

IRDAI, vide circular dated January 30, 2025[18], has directed all general and health insurers (except Agriculture Insurance Company of India and Export Credit Guarantee Corporation of India), offering indemnity based individual health insurance products to senior citizens to take the following steps with immediate effect:

not revise the premium for senior citizens by more than 10% per annum;
undertake prior consultation with the IRDAI,
- if the proposed increase in the premium for senior citizens is more than 10% per annum; or
- in case of withdrawal of individual health insurance products offered to senior citizens.
give wide publicity of the various measures taken for the benefit of senior citizens while offering health insurance products; and
take necessary steps for common empanelment of hospitals and negotiate package rates on the lines of Pradhan Mantri Jan Arogya Yojana scheme.

The above is in furtherance of a series of regulatory reforms undertaken by IRDAI in recent past for reinforcing empowerment of policyholders and bolstering inclusive health insurance.

Modifications to the pradhan mantri fasal bima yojana and restructured weather-based crop insurance scheme

The Union Cabinet, vide press release dated January 1, 2025[19], approved the continuation of the pradhan mantri fasal bima yojana and restructured weather-based crop insurance scheme till 2025-26, to help in risk coverage of crops from non-preventable natural calamities for farmers across the country. Additionally, the Union Cabinet has agreed to create a fund for innovation and technology with a corpus of INR 824.77 crore (Indian rupees eight hundred and twenty-four point seventy seven crore) for large scale technology infusion in implementation of the scheme which would lead to increase in transparency and claim calculation and settlement, which will be utilised for funding technological initiatives under the scheme, namely, Yield Estimation System using Technology and Weather Information and Network Data Systems as well as research and development studies.

This Newsletter has been prepared by:

Venkatesh Raman Prasad

Partner

Partner

Principal Associate

Associate

Associate

[1] IRDAI Press Release dated February 14, 2025.

[2] “Regulatory Sandbox” is an environment used in the financial services sector, which provides testing ground for new business models, processes and applications that may not necessarily be covered fully by, or are not fully compliant with, existing regulations.

[3] Notification dated January 3, 2025. CG-TL-E-09012025-260068.

[4] “Regulated Entity” means any entity coming within the regulatory domain of IRDAI or entity regulated by a foreign financial regulatory authority.

[5] “Requesting Entity” means the entity requesting information relating to a Requested Entity.

[6] “Requested Entity” means the domestic or foreign entity whose information is subject of disclosure under Information Regulations.

[7] “Foreign entity” means a foreign financial regulatory authority or any foreign financial entity.

[8] Notification dated January 3, 2025. CG-TL-E-09012025-260081.

[9] The conditions relating to bringing in efficiency in insurance business and ease of doing insurance business have been introduced under the Sandbox Regulations.

[10] Notification dated February 27, 2025. CG-TL-E-28022025-261337.

[11] Circular dated March 24, 2025. IRDAI/GA&HR/CIR/MISC/49/03/2025.

[12] Circular dated February 28, 2025, IRDAI/F&I/GDL/INV/041/02/2025.

[13] Circular dated March 10, 2025. IRDAI/F&I/INV/CIR/43/03/2025.

[14] Circular dated February 18, 2025. IRDAI/PP&GR/CIR/MISC/37/02/2025.

[15] Notification dated January 3, 2025. CG-TL-E-08012025-260051.

[16] Notification dated January 3, 2025. CG-TL-E-08012025-260050.

[17] Notification dated January 3, 2025. CG-TL-E-09012025-260080.

[18] Circular dated January 30, 2025. IRDAI/HLT/CIR/MISC/27/1/2025.

^[19] Press Release dated January 1, 2025. PIB Release ID: 2089249.

Tags Crop Insurance, Cyber Preparedness, Equity Derivatives, Forward Contracts, Health Insurance, India Insurance, Insurance News, Insurance Regulations, Insurance Update, IRDAI, Life Insurance, PMFBY, Regulatory Sandbox, Reinsurance, Senior Citizen Coverage, UPI Payments

Indian Insurance Sector: Recent Developments and Road Ahead | Sidharrth Shankar | Shivangi Talwar

The Indian insurance regulatory framework is set for an overhaul and the proposed amendments by the Government of India aim to focus on protection of policyholder interest, facilitating more players in the market, enhancing efficiencies in the insurance industry and promoting ease of doing business to ensure “Insurance for All by 2047”.

In this podcast, our Partners, Sidharrth Shankar and Shivangi Sharma Talwar discuss the proposed amendments to the regulatory landscape and its impact on stakeholders and the Indian insurance sector.

Transcript:

Question 1. What are the recent developments in the insurance sector

Response:

In November 2024, the Ministry of Finance in consultation with the IRDAI issued a memorandum proposing amendments to overhaul the insurance regulatory framework. The proposed amendments focus on ease of doing business and enhancing insurance penetration to achieve the goal of “Insurance for All by 2047”. The Government also invited comments from external stakeholders to the proposed amendments to the legislative framework.

In continuation with the Government’s proposal, the finance minister in the budget speech proposed to increase the FDI limit for insurance companies from 74% to 100%. The enhanced limit will be available for insurance companies which invest the entire premium in India, and it is also expected that the current guardrails and conditionalities associated with foreign investment will be reviewed and simplified. The finance minister also stated that specific benefits to insurance offices of global companies which are set up in IFSC will be proposed.

The amended bill to the Insurance Act,1938 and the allied acts is expected to be tabled in the current session.

Question 2. What are the expected changes in the legislative framework

Some of the key reforms are:

Increase in FDI

FDI in insurance companies is currently permitted up to 74%. Insurance companies with any foreign investment are required to have majority of its directors and key management persons as resident Indian citizens. Interestingly, insurance companies with more than more than 49% FDI are required to have (i) at least 50% of its directors to be independent directors, subject to certain exceptions and (ii) at least 50% of the net profit for the financial year to be retained in the general reserve, if (A) dividend is paid in the said financial year; and (B) solvency margin is less than 1.2 times of the control level (150%) of solvency.

It is expected that with the proposed increase in FDI limit to 100%, the existing conditionalities to FDI will be simplified including in relation to residency status of directors and key management persons. Under erstwhile insurance laws, a cooling off period of two financial years was prescribed to apply for registration of an insurance company, if the Indian promoter or the foreign investor had exited an insurance venture. Currently, there is no such restriction, and promoters including foreign promoters can exit a joint venture and immediately apply for registration of an insurance company with 100%FDI.

Composite License

Insurance companies can undertake life, general, standalone health insurance business under separate legal entities which requires the promoters to form separate entities and diversify their assets. It is proposed that insurance companies can obtain a com posite license under which life, general and health insurance business can be undertaken under one unified entity. This proposal aligns with the global practices in many jurisdictions and could lead to consolidation of existing ventures in the Indian insurance market.

Merger of Insurance companies

The Insurance Act prohibits a merger of or transfer of insurance business of an insurance company with a non-insurance company. This restriction was much debated in 2015 on the proposed merger of HDFC Life and Max Life. The said transaction involved an intermittent step of merger of Max Life with its listed holding company Max Financial Services and thereafter a merger of the combined entity with HDFC Life. After much debate, the transaction was rejected by the IRDAI on a technicality that the Insurance Act permits a merger between two insurance companies of the same class.

It is now proposed that insurance companies can merge and transfer insurance business to a company not engaged in insurance business. If implemented, this proposal could lead to innovative structures in the market where exits could be provided to investors investing in the promoter of an insurance company, also, non-insurance companies could achieve backdoor license to undertake insurance business.

Other Notable Reforms

The Government has also proposed reduced capital requirements for insurance companies that serve underserved segments, insurance companies to undertake incidental business other than insurance business, prior approval of the IRDAI for transfer or issuance of shares exceeding five percent of the share capital as opposed to one percent of the share capital, inclusion of managing general agents as an insurance intermediary to provide customised insurance solutions.

Conclusion

Reduced compliance burden, lower capital requirements, simplified process and effective and efficient implementation of such processes are key to transforming the insurance sector and for insurance to become a common and multi-faceted financial product with emphasis on financial literacy, distribution network, development of innovative products, utilization of AI and big data for product development, claim settlement and speedy claim redressal.

Tags Ease Of Doing Business, Financial Reforms, India 2047, Insurance For All, Insurance Framework, Insurance Industry, Insurance Law India, Insurance Podcast, Insurance Regulation, Insurance Sector, IRDAI, JSA Live, JSA Podcast, JSA Talks, Legal Insights, Policyholder Protection, Regulatory Updates, Stakeholder Impact

Revival of the Indian Insurance Landscape

The finance minister in her budget speech had proposed to increase the FDI limit in insurance companies to 100%, with an additional commitment to review and simplify the existing conditionalities associated with foreign investment. This aligned with the Government’s proposal issued in November 2024, that envisaged revamping of the legislative framework for the Indian insurance sector by introducing amendments to the existing regulatory framework.

Please click here to read the full article by Partners – Sidharrth Shankar and Shivangi Sharma Talwar published in Lexology.

Tags Budget 2025, Fdi, Insurance, JSA, Leading Law Firm, Leading Lawyers, Legal Updates

JSA advised 360 ONE Asset on its proposed investment in Bharti AXA Life Insurance

JSA advised 360 ONE Asset on its investment in Bharti AXA Life Insurance. The transaction is subject to regulatory approvals and customary closing conditions.

Our transaction team comprised: Lead Partner – Siddharth Mody, Partner – Rohan Kumar, and Senior Associate – Alister Sequeira.

Our diligence team comprised: Lead Partner – Siddharth Mody, Partner – Rohan Kumar, and Associates – Gavin Pereira, Regan D’Mello, and Ayush Chaturvedi.

Tags Asset Management, Insurance, Investment, JSA, Leading Law Firm, Leading Lawyers, Legal Updates

Insurance | Semi-Annual Compendium 2024

This Compendium consolidates the key developments pertaining to the insurance sector, which were circulated as JSA Newsletters/Prisms during the calendar period from July 2024 till December 2024.

To read further details, click here or refer to the below document.

For more details, please contact [email protected]

*In case the document is not visible on the device you are using, please click the link above.

Tags Corporate, Insurance, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Newsletters

JSA Newsletter | Insurance | October to December 2024 Edition

Please click here to download the Newsletter.

With the objective to strengthen the insurance sector, the 8th Bima Manthan, held in November 2024, focused on equipping India’s insurance industry for future challenges and aligning it with global standards. Key discussions included the implementation of the Indian Risk-Based Capital regime, Risk-Based Supervisory Framework, and Indian Accounting Standards. Updates on the Bima Sugam digital platform underscored its potential to enhance accessibility and transparency. The event reinforced a collective commitment to achieving the vision of “Insurance for All by 2047”.

In line with this vision, the Government of India is considering amendments to the Insurance Act, 1938, the Life Insurance Corporation Act, 1956, and the Insurance Regulatory and Development Authority Act, 1999. The proposed changes aim to improve accessibility, affordability, and efficiency in the insurance sector. In November 2024, the Ministry of Finance invited stakeholders’ comments on proposals such as raising the Foreign Direct Investment limit to 100%, reducing the net owned fund requirement for foreign reinsurers, allowing multi-class insurance businesses, and empowering the Insurance Regulatory and Development Authority of India (“IRDAI”) to specify lower entry capital for underserved markets. These measures are designed to protect policyholders’ interests, increase insurance penetration, and foster economic growth.

According to news reports, the Parliamentary Committee has approved these reforms, and the Insurance Bill may be introduced in the upcoming parliamentary session.

This newsletter captures key regulatory developments in the insurance sector from October to December 2024, highlighting various measures introduced to promote ease of doing business and safeguard policyholders’ interests.

Investment of funds of unit linked insurance business

The International Financial Services Centres Authority (“IFSCA”), vide notification dated October 17, 2024, has issued the IFSCA (Investment by International Financial Services Centre Insurance Office) (Amendment) Regulations, 2024, amending the IFSCA (Investment by International Financial Services Centre Insurance Office) Regulations, 2022. Some of the key amendments are as follows:

Regulation 9A is inserted in relation to dealings with the investment of the funds pertaining to unit linked insurance products by International Financial Services Centre Insurance Office (“IIO”). Every IIOs must invest and keep invested its funds of unit linked business as per the pattern of investment subscribed by the policyholders, where the units are linked to categories of assets which are both marketable and readily feasible.
Matrix 1A under Regulation 9A prescribes the exposure limits for investment of unit linked business assets in entities, group and industry. These limits are applicable at the level of individual segregated fund as set out below:

Sl. No.	Overall exposure by an insurer	Maximum investment by an insurer as a % of the total unit linked business assets
1.	A single entity (investee)	10
2.	Within the IIO’s own group	5
3.	To any other single group	15
4.	To a particular industrial sector	15

For the investments in passively managed/index-based mutual funds and exchange traded funds, the above-mentioned exposure norms (other than within the IIO’s own group) will apply only after (the earlier of): (a) 3 (three) years from the date of launch of individual segregated unit linked fund; or (b) the assets under management of an individual segregated unit linked fund becomes equal to or more than USD 25,000,000 (US Dollars twenty-five million).
Regulation 9B is inserted in relation to the investment of retained premiums by IIOs in Domestic Tariff Area (“DTA”). The type of investment assets and the maximum exposure limits for such investment by IIOs in DTA must be in accordance with the prescribed Matrix IB as set out below:

Sl. No.	Type of Investment Asset	Maximum Exposure Limit (%)
1.	Securities of Central Government of India	10
2.	Corporate bonds	15
3.	SEBI approved Alternative Investment Funds	10
4.	Immovable property including Real Estate Investment Trusts	5
5.	Infrastructure including Infrastructure Investment Trusts and instruments for financing Infrastructure Assets	5
6.	Money markets instruments for short period	90
7.	Investment in ‘equity’, preference shares, convertible debentures	25
8.	Investment in debt	90

Streamlining the registration process for insurance businesses within the IFSCA

IFSCA, vide notification dated October 17, 2024, has issued the IFSCA (Registration of Insurance Business) (Amendment) Regulations, 2024 amending the IFSCA (Registration of Insurance Business) Regulations, 2021. Some of the key amendments are as follows:

at the time of making the application, the applicant must opt for a category under Regulation 5(2)(A) (Offer for Participation under Procedures for Re-insurance placements) of the IRDAI (Re-insurance) Regulations, 2018, under which it intends to participate in reinsurance business emanating from the DTA; and
certain forms, such as FORM-A (application by an Indian insurer or Indian re-insurer for grant of certificate of registration as IIO), FORM-B (application by a foreign insurer or foreign re-insurer for grant of certificate of registration as an IIO), FORM-C (joint application by an managing general agent and foreign insurer or foreign reinsurer for grant of certificate of registration as an IIO) and FORM-D (application by an public company, wholly owned subsidy of insurer or re-insurer, insurance co-operative society, body corporate incorporated outside India for grant of certificate of registration as IIO) in the First Schedule relating to application for registration and FORM A (certificate of registration) and FORM B (joint certificate of registration for managing general agent and relevant foreign insurer or foreign re-insurer) in Fourth Schedule relating to certificate of registration, are omitted, pursuant to the introduction of Single Window IT Systems (SWITS) by the IFSCA.

Please click here to access the consolidated IFSCA (Registration of Insurance Business) Regulations, 2021 (updated as on October 17, 2024).

Improving processes for claims for relief against environmental damages

The Ministry of Environment, Forest and Climate Change (“MoEFCC”), vide notification dated December 17, 2024, has issued the Public Liability Insurance (Amendment) Rules, 2024, amending the Public Liability Insurance Rules, 1991. Some of the key provisions are as follows:

Rule 3 is revised to specify that applications for property restoration can be made to the collector in Form I. Further, it is clarified that an application for claim for restoration of the property may also be filed by a person who holds an interest in the affected public property, and can demonstrate a direct and substantial connection with that property;
Rule 3A is inserted outlining the process for allocating funds from the Environmental Relief Fund (“Fund”) for environmental damage restoration. The Central Pollution Control Board (“CPCB”) or State Pollution Control Boards (“SPCBs”) must apply to the Central Government in Form II for allocation of funds from the Fund. The Central Government will determine the amount to be allocated from the Fund, which cannot exceed 10% of the amount available in the Fund, and an order in this regard will be issued in Form III;
Rule 5A is inserted mandating industrial units to publicise among the affected persons their right to claim for relief in case of an accident occurring in any industrial unit;
Rule 9 is substituted to specify that the notice of intent to make a complaint of an alleged offence under Section 18(b) of the Public Liability Insurance Act, 1991 must be sent through registered speed post or electronic mail using Form IV, to the CPCB or to the secretary to the Government of India in the MoEFCC (in case the offence is committed in Union Territory) or to the SPCB or to the secretary of the State Government in charge of the Department of Environment and Forest (in case offence is committed in the State);
the maximum insurance policy limit under Section 4(2A) of the Public Liability Insurance Act, 1991 is increased to INR 250,00,00,000 (Indian Rupees two hundred and fifty crore) per incident (earlier this was INR 5,00,00,000 (Indian Rupees five crore)) and INR 500,00,00,000 (Indian Rupees five hundred crore) for multiple accidents in a policy year (earlier this was INR 15,00,00,000 (Indian Rupees fifteen crore)). The owner is liable to reimburse or provide relief for the loss or damage in accordance with the amounts specified in the Second Schedule of the amended rules; and
Rules 12 to 16 are inserted outlining the process for filing complaints (Form V), manner of holding inquiries (involving issuance of notice by the adjudicating officer in Form VI and evidence submission in Form VII), transfer of complaint, extension of time and issuing orders or fines. The adjudicating officer is required to complete the proceeding within 6 (six) months of the issuance of the notice.

This Newsletter has been prepared by:

Sidharrth Shankar
Partner

Rishika Agarwal
Senior Associate

For more details, please contact [email protected]

Tags IFSCA, Insurance, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Newsletter

JSA Newsletter | Insurance | July to September 2024 Edition

Please click here to download the Newsletter as a PDF.

This Newsletter captures the key regulatory developments in the insurance sector between July – September 2024. The Insurance Regulatory and Development Authority of India (“IRDAI”) has introduced various measures to promote ease of doing business and to ensure the protection of the interests of the policyholders. This Newsletter describes the relevant developments and changes in regulations concerning the insurance sector in the third quarter of 2024.

Subscribers to other forms of capital

IRDAI, vide circular dated September 6, 2024,[1] has amended the Master Circular on Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers, 2024 dated May 15, 2024 (“Master Circular”). Paragraph D.2 of the Master Circular, which stipulates eligible subscribers to other forms of capital (i.e. preference share capital or subordinated debt) (“OFC”), earlier provided that the OFC issued by any insurer may only be subscribed by an Indian Promoter, Indian Investors, Foreign Promoter and Foreign Investors (each as defined under the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024).

However, pursuant to the amendment to Paragraph D.2 of the Master Circular, the OFC issued by an insurer may be subscribed by any of the following entity(ies) subject to compliance with all other applicable laws (for instance, taxation, exchange control, anti-money laundering):

any entity incorporated, set-up or registered under any law for the time being in force in India; or
any entity incorporated, set-up or registered under any law for the time being in force in any financial action task force compliant jurisdiction.

It has been clarified that any OFC issued prior to September 6, 2024, will continue to be governed by the terms of issuance of the said OFC.

Protection of policyholders’ interests under the IRDAI (Protection of Policyholders’ Interests, Operations, and Allied Matters of Insurers) Regulations, 2024[2]

Master circular on Protection of Policyholders’ Interests under the IRDAI (Protection of Policyholders’ Interests, Operations, and Allied Matters of Insurers) Regulations, 2024 (“Policyholders’ Regulations”) was issued on September 5, 2024. It consolidates policyholder entitlements into a single reference document and emphasizes measures towards providing seamless, faster and hassle-free claims settlement experience to a policyholder and enhance service standards, to foster a climate of trust and transparency within the insurance sector. It is divided into two sections:

Section 1: It contains a summary of important and relevant information at various stages of an insurance contract for the prospects / policyholders / customers; and
Section 2: It contains broad requirements to be complied by an insurer under the Policyholders’ Regulations.

Some of the key provisions of this master circular are as below:

it provides key information/stipulations relevant at various stages of life, health and retail general insurance policies, i.e., prior to sale, at the proposal stage, at the time of receipt of policy document, during the currency of the policy, and at the time of claim;
insurers are mandated to provide a Customer Information Sheet (“CIS”) for all insurance segments detailing key policy features, benefits, and exclusions;
the proposal form and CIS must be made available in regional language upon request of the prospect/policyholder;
a 30 (thirty) day free look period applies to both life and health insurance policies, thereby allowing policyholders to review the policy terms and conditions. In case a policyholder is not satisfied with any of the terms and conditions, they have the option to cancel their policy;
insurers are required to enable their information technology systems to interact with Digilocker allowing policyholders to use this service effectively;
no premium / proposal deposit would be required to be paid to the life/health insurer along with the proposal form except in case of policies where risk cover commences immediately on receipt of premium;
a claimant/policyholder can search for unclaimed amounts payable to them at the Bima Bharosa website of IRDAI (which provides at one place access to website links of various insurers where unclaimed amounts held by them are displayed) or verify from the website of the concerned insurer; and
every insurer must put in place Citizens’ Charter specifying the service standards both in qualitative and quantitative terms to empower customers with information about availability of products, standards of service, time limit that the customers can reasonably expect and avenues of grievance redressal.

Withdrawal of guidance on commission on long-term motor policies[3]

Pursuant to the notification of the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024 (“EoM Regulations”), IRDAI, vide its circular dated July 18, 2024, has repealed the circular dated August 29, 2018[4] on Payment of Commission, Remuneration, Rewards and Distribution Fees under Long Term Motor Insurance Policies (“2018 Circular”).

The 2018 Circular primarily prescribed the structure for payment of commission, remuneration and rewards to the insurance agents and insurance intermediaries for long duration motor insurance policies.

The EoM Regulations read with the master circular on Expenses of Management, including Commission, of Insurers, 2024,[5] provide flexibility to the insurers to manage their expenses, including payment of commissions, within the overall limits specified by IRDAI. Accordingly, the 2018 Circular had become redundant with the notification of the EoM Regulations and has now been repealed.

Amendments made to the master guidelines on anti-money laundering/ counter financing of terrorism[6]

Pursuant to the recent amendments made to the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 (“PML Rules”), IRDAI has amended the Master Guidelines on Anti-money Laundering/ Counter Financing of Terrorism dated August 1, 2022 (“Master Guidelines”).[7] Clause 12 of the Master Guidelines inter-alia provided that insurers must refer to the Central KYC Registry (“CKYCR”) for retrieving the Know Your Customer (“KYC”) records without asking the customer to submit KYC records again. However, pursuant to the amendment, the Master Guidelines are modified as follows:

as part of compliance with the KYC norms, insurers must adopt the procedure specified in Rule 9(1C) of the PML Rules, which requires that, for the purposes of verification of identity of clients, the reporting entity must seek the KYC identifier from clients or retrieve the KYC identifier from CKYCR(if available) and not require the client to resubmit such records/information except in certain cases such as change in information, record being incomplete or not as per current applicable KYC norms, validity period of document having lapsed;
the obligation of insurers to search for KYC identifier (with certain credentials) on the CKYCR portal (if KYC identifier is not submitted by the client/customer) has now been omitted;
where additional/updated KYC information is obtained from a client under Rule 9(1C) of the PML Rules, insurers must furnish the updated information to the CKYCR within 7 (seven) days or other stipulated time period; and
if an update in the KYC record of an existing client is informed by the CKYCR to the insurer, the insurer must retrieve the updated KYC records from the CKYCR and update the KYC records maintained by it.

Accessibility standards and guidelines for infrastructure and services in insurance sector[8]

To address the accessibility needs of persons with disabilities in respect of the facilities and services in the insurance sector, the Ministry of Finance has issued the ‘Accessibility Standards and Guidelines for Infrastructure and Services in the Insurance Sector’. These aim to make insurance facilities and services accessible to individuals with disabilities, in both urban and rural areas, in line with the Rights of Persons with Disabilities Act, 2016. Some of the facilities and services in the insurance sector for persons with disabilities are as follows:

home collection/delivery of insurance and /or claim documents, for persons with disabilities, through insurance agents/by post/courier/electronic means;
insurance offices to provide all practical assistance to persons with disabilities so as to ensure that no person with disability is denied access due to non-availability of accessibility in services;
website and apps should be designed and developed in such way that they are accessible by all people, whatever may be their hardware, software, language, culture, location, or physical or mental ability;
documents to be placed on websites must be in electronic publication or Optical Character Reader based pdf format; and
every building owned, operated/used and/or managed in the insurance sector must be compliant with Harmonized Guidelines and Standards of Universal Accessibility in India, 2021 issued by the Ministry of Housing and Urban Affairs.

This Newsletter has been prepared by:

Venkatesh
Raman Prasad
Partner

Ronak Ajmera
Partner

Ankita Jain
Principal Associate

Udit Rao
Associate

Shivaram Gopal
Associate

For more details, please contact [email protected].

[1] Circular dated September 6, 2024, IRDAI/F&I/CIR/Misc/119/9/2024

[2] Circular dated September 5, 2024, IRDAI/PP&GR/CIR/MISC/117/9/2024

[3] Circular dated July 18, 2024, IRDAI/INT/CIR/MISC/104/7/2024

[4] Circular dated August 29, 2018, IRDA/INT/CIR/COMM/139/08/2018

[5] Circular dated March 15, 2024, IRDAI/F&I/CIR/79/5/2024

[6] Circular dated August 12, 2024. IRDAI/IID/CIR/MISC/112/8/2024

[7] Circular dated August 1, 2024, IRDAI/IID/CIR/MISC/112/8/2024

[8] Notification dated August 20, 2024. CG-DL-E-20082024-256498

Tags Insurance, IRDAI, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Newsletter

Insurance | Semi-Annual Compendium 2024

This compendium consolidates all the relevant notifications and circulars pertaining to Insurance, which has been circulated during the calendar period from January 2024 till June 2024.

To read further details, click here or refer to the below document.

For more details, please contact [email protected]

*In case the document is not visible on the device you are using, please click the link above.

Tags Corporate, Insurance, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Newsletters

JSA Newsletter | Insurance | April to June 2024 Edition

Please click here to download the Newsletter as a PDF.

This newsletter captures the key regulatory developments in the insurance sector between April – June 2024. The Insurance Regulatory and Development Authority of India (“IRDAI”) and the International Financial Services Centres Authority (“IFSCA”) have introduced various measures to promote ease of doing business and to ensure the protection of the interest of the policyholders. This Newsletter describes the relevant developments which have changed and enhanced the structure of the insurance sector in the second quarter of 2024.

Master Circulars:

Master circular on rural, social sector and motor third party obligations

This master circular is issued in line with the IRDAI (Rural, Social Sector and Motor Third Party Obligations) Regulations, 2024, and specifies that life, general and stand-alone health insurers will mandatorily insure a minimum percentage of lives (for life, health and accident insurance), dwelling and shops, and vehicles towards meeting rural, social sector and motor third-party obligations.[1] Some of the key provisions of the circular are as follows:

all life insurers must insure a minimum percentage of lives in identified and allocated gram panchayats. Similarly, general insurers must insure (i) minimum percentage of dwelling and shops under fire insurance; (ii) minimum percentage of vehicles under motor insurance; and (iii) minimum percentage of lives under health insurance and personal accident insurance to achieve complete saturation of the identified gram panchayats;
detailed methodology is provided for arriving at the obligations with respect to rural, social sector and motor third party coverage; and
processes to check compliance and essential reporting requirements are prescribed.

Master circular on submission of returns

Certain IRDAI regulations and their corresponding master circulars require insurers and reinsurers, to submit certain returns on a periodical basis. This master circular aims to create a single reference for all such returns to be filed and harmonise the timelines and instructions for filing of these returns into a unified framework.[2] It is applicable to every life insurer, general insurer, health insurer and reinsurers and foreign reinsurance branches transacting reinsurance business in India.

Master circular on registration, capital structure, transfer of shares and amalgamation of insurers, 2024

This master circular is issued to specify various forms and provide clarifications on various provisions prescribed under the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024,[3] such as details of various applications to be submitted for including registration as an insurance company, submissions of returns and transitory provisions, listing of equity shares, scheme of amalgamation, issuance of capital, compliance with regards to shares allotted pursuant to ESOP or any other similar scheme for the benefit of the employees or directors of the insurer. It is applicable to all insurers (excluding foreign reinsurer’s branches) and applicants seeking registration to carry on insurance business.

Master circular on expenses of management, including commission, of insurers, 2024

This master circular is issued to supplement the IRDAI (Expenses of Management, including Commission, of Insurers) Regulations, 2024.[4] It is applicable to life, general and health insurers. Some of the key provisions of the circular are as follows:

every insurer must formulate a policy, approved by the board, for payment of commission;
every insurer must prepare a business plan, which will be monitored by the board at regular intervals;
every insurer must place the return and the statutory auditor’s certificate before the board for approval. The return of expenses of management and specified documents duly adopted by the board as well as the certified true copy of minutes of the approving these documents must be filed with the IRDAI along with annual financial statements; and
every insurer must place the return on payment of commission before the board for approval and submit the same to the IRDAI.

Master circular on actuarial, finance and investment functions of insurers

This master circular is issued to provide guidance on various provisions of the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024.[5] It is applicable to all insurers including those engaged exclusively in re-insurance business, unless otherwise specified. The master circular is divided into 3 (three) broad heads – Actuarial Function, Finance Function and Investment Function. Some of the key provisions of the circular are as follows:

Actuarial Function: it details provisions relating to appointment of appointed actuary/mentor actuary/consulting actuary/certifying actuary; prescribes valuation provisions and returns to be filed for life, general, standalone health insurance and reinsurance business;
Finance Function: all insurers must furnish the annual financial statements and other filings with the IRDAI within 3 (three) months from end of the financial year, or within 30 (thirty) days from the date of adoption of accounts by the board, whichever is earlier;
Investment Function: it prescribes the various categories of investments and the valuation methodology for investment in such categories by insurers. Insurers must ensure that there are proper risk management systems with respect to investment. Insurers must build an adequate expertise in equity research by establishing a dedicated equity research department, corresponding with the scale of their operations. They must ensure robust internal credit rating systems to ensure continuous monitoring of the rating migration of the issuers/issues.

Master circular on corporate governance for insurers

The main objectives of the master circular are, to provide a framework for insurers to: (a) adopt sound and prudent principles and practices in their governance structure, and (b) define the roles and responsibilities of the board of directors and management of insurers and establish stewardship principles to protect the interests of all stakeholders, particularly policyholders. [6]

For a detailed analysis, please refer to the JSA Prism of May 2, 2024.

Master circular on health insurance business

This master circular provides guidance on various provisions of the IRDAI (Insurance Products) Regulations, 2024 relating to health insurance. [7] It is applicable to all life, general and health insurers. Some of the key provisions of the circular are as follows:

existing products which are not complying with the IRDAI (Insurance Products) Regulations, 2024 and this master circular must be modified on or before September 30, 2024;
wider choice must be provided by insurers by making available products/add-ons/riders by offering diverse insurance products catering to all ages, regions, occupational categories, medical conditions/ treatments, all types of hospitals and health care providers to suit the affordability of the policyholders/prospects;
insurers should endeavor to cover technological advancements and treatments;
guidelines on insurance product which include free look period, payment of premium, renewal, portability, cashless facility, settlement of claims, and no claim bonus.
introduction of ‘Customer Information Sheet’, which is to be provided by the insurer, along with every policy document, which explains the basic features of insurance policies in simple words; and
customer must be provided with the flexibility to choose products/add-ons/riders as per his/her medical conditions/specific needs.

Master circular on general insurance business

This master circular provides guidance on various provisions of the IRDAI (Insurance Products) Regulations, 2024 relating to the operational aspects of general insurance products.[8] It is applicable to all general insurers and to every existing general insurance product and add-on covers. Some of the key provisions of the circular are as follows:

availability of wider choices of products/add-ons covering customer assets, risks, properties, liabilities against various perils, exposures and lines of business;
possibility of customisation of products and flexibility to choose products as per customer’s needs;
guidelines on insurance product which include payment of premium, renewal, cashless facility, settlement of claims, and no claim bonus.
introduction of a ‘Customer Information Sheet’ to provide clear and concise policy details, including scope of coverage, exclusions, warranties, and claim settlement processes;
broad principles introduced for compliance by insurers, by providing oversight and governance mechanism to be strengthened for various stages of insurance contract; and
work allocation to be done on a random basis in an automated manner without human intervention through a tech-based solution, to ensure equitable and fair opportunities to the surveyors and loss assessors.

Master circular on life insurance products

This master circular provides guidance on various provisions of the IRDAI (Insurance Products) Regulations, 2024. [9] It is applicable to all life insurers. Some of the key provisions of the circular are as follows:

a ‘Customer Information Sheet’ must be provided with every policy in the prescribed format along with the policy document explaining in simple words the basic features of a policy;
facility of policy loan is now mandatory for all life insurance savings products, enabling policyholders to meet liquidity requirements;
guidelines on insurance product which include free look period, payment of premium, renewal, cashless facility, settlement of claims, and no claim bonus.
the free look period, allowing policyholders to review the terms and conditions, has been extended from 15 (fifteen) days to 30 (thirty) days.

Master circular on reinsurance

This master circular provides guidance on various provisions of the IRDAI (Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India) Regulations, 2024 and IRDAI (Reinsurance) Regulations, 2018.[10] It is applicable to all insurers, reinsurers, foreign reinsurers branches and Lloyd’s India. It details provisions relating to registration of foreign reinsurers branches, Lloyd’s India, service companies and syndicates of Lloyd’s India and their operations. It also prescribes conditions for placement of reinsurance business with Cross Border Reinsurers (“CBRs”). CBRs accepting re-insurance business from India cedants are required to maintain collateral in India. The collateral can be either in the form of irrevocable Letter of Credit from the CBR or premium / funds withheld by the ceding insurer. These provisions are applicable for all the reinsurance placements with CBRs by cedants from India, for reinsurance programs for FY 2025-26 onwards.

Master circular on operations and allied matters of insurers

This master circular is issued to strengthen the governance measures on the operations and allied matters of insurer and to boost the policyholder centric reform in the insurance sector.[11] It is in line with the IRDAI (Protection of Policyholder’s Interests, operations and allied matters of Insurers) Regulations, 2024 and is applicable to all life insurers, general insurers, health insurers and distribution channels. Some of the key provisions of the circular are as follows:

insurers must have a tech based robust mechanism for efficient and speedy grievance redressal of policyholders, while also striving to move towards “zero grievances”. Insurers must strengthen the resolution processes with internal escalation matrix and Internal Ombudsman Schemes;
Advertisement Committee, approved by the IRDAI, and/or a senior level officer of the distribution channel must examine and approve the advertisements to ensure that they are true and are not misleading;
insurers are required to adopt a phygital approach (both physical and digital) to open places of business, to make insurance accessible at remote locations of the country;
insurers can outsource permitted activities only if they are economical and efficient in providing services to the customers and/or enhance value to their business; and
provisions to streamline group insurance business, such as:

- insurers to issue ‘Certificate of Insurance’ to all the members of a non-employer-employee group scheme;
- consent of nominee/policyholder/beneficiary is necessary for repayment of outstanding loan amount from the proceeds of an assigned policy; and
- no claim will be denied for non-availability of details of members of the group, in case of group mediclaim policies.

Denotification of tariffs

IRDAI is empowered to de-notify tariffs previously notified by the Tariff Advisory Committee. In this regard, IRDAI, vide notification dated March 20, 2024, denotifies the following insurance tariffs with effect from April 1, 2024:

Fire Insurance Tariffs, namely, All India Fire Tariff, Industrial All Risks Tariff, Consequential Loss (Fire) Tariff, Petro-chemical Tariff, List of Hazardous Goods;
All India Motor Tariff;
Engineering Insurance Tariffs, namely, Contractors All Risk Insurance, Contractors Plant and Machinery Insurance, Machinery Breakdown Insurance, Electronic Equipment Insurance, Civil Engineering Completed Risks Insurance, Erection All Risk/Storage Cum Erection Insurance, Loss of profit (MB & BLOP) Insurance, Boiler and Pressure Vessels Insurance;
Deterioration of Stocks-(potato) Insurance;
Workmen’s Compensation Insurance Tariffs; and
Tea Tariff.

The coverage of risks coming within the scope of the denotified tariffs are subject to the IRDAI (Insurance Products) Regulations, 2024 and the Master Circular (Guidelines) on products and procedures in general insurance business. It is clarified that an insurer cannot withdraw or discourage the use of or decline to offer to any customer any of the tariff products which are in existence, prior to this notification.

Insurers no longer required to submit information relating to cases

IRDAI has withdrawn its circular dated December 17, 2009, which required all life and general insurance companies to submit, on a quarterly basis, details of the cases filed against insurers by policy holders in the various consumer courts challenging repudiation of claims and awards passed by the ombudsman in the different courts. [12]

Unsolicited Commercial Communications (“UCC”) through telecom resources

IRDAI has instructed all Regulated Entities (“REs”), insurance companies and insurance intermediaries not to call customers from an unauthorised 10-digit mobile number and landline numbers to curb UCC through voice calls or messages, in line with the guidelines of Telecom Regulatory Authority of India (“TRAI”) dated May 4, 2024.[13] An IRDAI licensed RE, sending a commercial communication to their existing or prospective customers must fulfil TRAI prescribed regulatory requirements and get registered with any of the telecom service providers.

Frequently Asked Questions (“FAQs”) on IFSC Insurance Office

FAQs on IFSC Insurance Office are updated as on May 30, 2024.

Using motor vehicles without valid motor third party insurance is a punishable offence

The Ministry of Road Transport & Highways has declared that those who drive or allow an uninsured vehicle to be driven without a valid motor third party insurance will be liable to be punished.[14] Such offenders are punishable under Section 196 of the Motor Vehicles Act, 1988:

first offence: imprisonment upto 3 (three) months, or fine of INR 2,000 (Indian Rupees two thousand) or both; and
subsequent offence: imprisonment upto 3 (three) months, or fine of INR 4,000 (Indian Rupees four thousand) or both.

This Newsletter has been prepared by:

Sidharrth Shankar
Partner

Abhik Sriram Kunduri
Senior Associate

For more details, please contact [email protected]

[1] Circular dated May 10, 2024. F. No. IRDAI/NL/CIR/RSS/77/5/2024.

[2] Circular dated June 14, 2024. IRDAI/NL/MSTCIR/RT/93/6/2024.

[3] Circular dated May 15, 2024. IRDAI/F&I/CIR/78/5/2024.

[4] Circular dated May 15, 2024. IRDAI/F&I/CIR/79/5/2024.

[5] Circular dated May 17, 2024. IRDAI/ACTL/CIR/MISC/80/05/2024.

[6] Circular dated May 22, 2024. IRDAI/F&I/CIR/MISC/82/5/2024.

[7] Circular dated May 29, 2024. IRDAI/HLT/CIR/PRO/84/5/ 2024.

[8] Circular dated June 11, 2024. IRDAI/NL/MSTCIR/MISC/90/6/2024.

[9] Circular dated June 12, 2024. IRDAI/ACTL/MSTCIR/MISC/89/6/2024.

[10] Circular dated May 31, 2024. IRDAI/REIN/MSTCIR/MISC/87/5/2024.

[11] Circular dated June 19, 2024. IRDAI/PPGR/CIR/MISC/97/06/2024.

[12] Circular dated May 1, 2024. IRDAI/LGL/CIR/71/5/2024.

[13] Circular dated May 28, 2024. IRDAI/ PP&GR/CIR/MISC/83/05/2024.

[14] Press Release dated June 11, 2024.

Tags IFSCA, Insurance, IRDAI, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Newsletters

Warranty and Indemnity Insurance for M&A Transactions: Frequently Asked Questions

Continuing with our series on the importance of Warranty and Indemnity (W&I) Insurance Policies for M&A Transactions, Nandini Seth (Partner) and Dhruv Malhotra (Principal Associate) answer some of the frequently asked questions raised by clients while considering a W&I insurance backed deal.

Transcript

I am a potential acquirer looking to procure a buy-side W&I insurance policy. When should I start the process?

As a buyer, who is looking to procure a warranty and indemnity insurance policy for a transaction, it would be useful to speak to, and get in touch with an insurance broker as early as the commencement of the due diligence process.

I am a seller with a limited fund life and want to structure a NIL recourse exit. How should I approach this?

As sell side, it is advisable to bring up W&I insurance in the initial discussions. We have seen clients discuss W&I insurance (with limited recourse or NIL recourse) at the LOI/ term sheet stage itself.

While structuring a NIL recourse deal, is it possible for the insurer to consider the buy side draft of the acquisition agreement for providing insurance coverage?

No, insurers insist on providing comments only on a negotiated acquisition agreement, particularly the representations and warranties schedule. Based on our experience, it is advisable that the parties negotiate the representations and warranties as if the deal is structured on an indemnity basis before submitting the transaction documents for the purposes of procuring insurance.

Does a corporate seller need to continue to exist throughout the duration of the W&I insurance policy?

W&I insurance makes for an excellent choice for funds with a limited fund life or which are winding up shortly. This is because the seller does not need to be in existence for the duration of the W&I insurance policy.

As a buyer, should there be any kind of rights against the seller in case of a NIL recourse deal backed by W&I insurance?

Yes, please ensure that there is a subrogation right against the seller for fraud. Insurers typically require incorporation of this right in the transaction documents as well as in the insurance policy.

Can a buyer procure a W&I insurance policy after signing the transaction documents?

Absolutely. An insurance policy can be procured after signing the transaction documents. However, do remember that in such a case, there will be coverage gaps for breaches discovered between the signing date and the policy inception date.

Can the payment of premium be delayed until the closing of the transaction?

Insurers typically provide a time period (after the inception of the policy) for paying the insurance premium. In fact, insurers understand these issues and have also accommodated upfront requests for refund of an identified percentage of premium for a W&I policy due to non-occurrence of closing.

What is the typical premium payable for procuring a W&I insurance policy?

While the premium payable generally ranges from 2.2% to 3.5% of the insurance limit, it can go as low as 1.5% or higher as well. The premium quoted by the insurers is specific to each transaction.

Tags JSA, Leading Law Firm, Leading Lawyers, Mergers and Acquisitions, Warranty and Indemnity

New Filters: Insurance

Re-enactment of regulations concerning maintenance of records and sharing of confidential information

Re-enactment of regulations concerning the Regulatory Sandbox framework

Obligatory cession for the financial year 2025-26

Cyber incident and crisis preparedness

Guidelines permitting insurers to utilise equity derivatives to hedge their equity exposures

Exposure to forward contracts in government securities

One-time mandate for blocking premium amounts through unified payments interface for issuance of life and health insurance policies

Enhancing efficiency in meetings of IRDAI

Enhancing efficiency in functioning of the insurance and reinsurance advisory committees

Review of revision in premium rates under health insurance policies for senior citizens

Modifications to the pradhan mantri fasal bima yojana and restructured weather-based crop insurance scheme

Subscribers to other forms of capital

Protection of policyholders’ interests under the IRDAI (Protection of Policyholders’ Interests, Operations, and Allied Matters of Insurers) Regulations, 2024[2]

Withdrawal of guidance on commission on long-term motor policies[3]

Amendments made to the master guidelines on anti-money laundering/ counter financing of terrorism[6]

Accessibility standards and guidelines for infrastructure and services in insurance sector[8]

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