IRDA: Capital Raising Regs For Non-Life

IRDA issues Regulations on Issuance of Capital by Indian Insurance Companies transacting other than life insurance business The Insurance Laws (Amendment) Act, 2015 (Act) gave an impetus to the capital deprived insurance sector by raising the Foreign Direct Investment (FDI) cap in the Indian insurance sector from 26% to 49% of the paid-up capital of an Indian Insurance Company (IIC). The Act also empowered the Insurance Regulatory and Development Authority of India (IRDA) to prescribe other forms of capital i.e. preference shares and subordinated debt to be recognized as capital.In order to allow insurers raise funds through a public issue whereby Indian promoters could divest their shareholding to 49% as permitted under the Act and to grant IICs access to tier two capital (i.e. preference shares and subordinated debt), the IRDA issued an exposure draft i.e. the Insurance Regulatory and Development Authority of India (Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business) Regulations, 2015 which was placed on its website for public comments. The IRDA has now notified the Insurance Regulatory and Development Authority of India (Issuance of Capital by Indian Insurance Companies transacting other than Life Insurance Business) Regulations, 2015 (Regulations) in supersession of the Insurance Regulatory and Development Authority (Issuance of Capital by General Insurance Companies) Regulations, 2013 (erstwhile Regulations). The Regulations come into force from date of their publication in the Official Gazette being 15 December 2015. The Regulations prescribe the manner and procedure for application to the IRDA, criteria to be evaluated by the IRDA for grant of approval and the power of IRDA to issue directions in connection with the issuance of capital by IICs  transacting other than life insurance business.  This EY alert summarizes the key features of the Regulations issued by the IRDA.

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