Insurance reforms in first 100 days agenda of BJP government if voted back

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₹100 crore for setting up a life, general or health insurance business and ₹200 crore for reinsurance businesses. The finance ministry has instead proposed a differential licencing regime where insurance companies will be categorized by the size and scale of operations, class or sub-class of the business, and the category or type of insurer.

Accordingly, the draft bill has now removed capital requirement clause and instead given the powers to determine capital requirements of companies to the Insurance Regulatory and Development Authority (IRDA) in consultation with the government. Differential licencing would enable micro-insurers, which are now deterred by high capitalization needs, to offer affordable insurance cover in rural areas and to low-income people, said the people cited above.

It has also introduced the concept of a “captive insurer", a general insurance company undertaking business exclusively for its holding/subsidiary/associate companies. This move will likely allow conglomerates and corporate groups to incorporate an insurer to cover business-related risks within their groups.

The bill will bring far-reaching reforms to the insurance sector and help in further improving insurance penetration in the country, said an official at a global audit and consultancy firm—one of the two people cited above–on the condition of anonymity as the bill is still under discussion and there was no clarity on the way forward. The amendments also bring several other changes, including simplified investment conditions, reduced net-owned fund requirement for foreign reinsurers, differential solvency margin, and bringing insurance companies on par with banks regarding share-transfer approval.