Irdai ends prior nod for insurers to raise capital via preference shares and debts

New Delhi: In a bid to promote ease of doing business, insurance regulator Irdai has decided to do away with the prior approval requirement for raising capital through preference shares and subordinate debts by insurers.

The decision was taken in the board meeting held recently, sources said.

As per the decision, the issue of Other Forms of Capital (OFC) should not exceed 50 per cent of the paid-up share capital or net worth of the insurance company.

The board has also done away with the prior approval requirement for exercising the call option under OFC subject to a solvency ratio not less than 180 per cent

As per the existing norms, the insurance companies are required to take permission from the Insurance Regulatory and Development Board of India (Irdai).

Other reforms approved by the board included proposals related to distribution and management expenses. This was the first board meeting under newly appointed chairman Debasish Panda.

The board hiked the maximum investment limit of insurers in banking, financial services and insurance (BFSI) companies to 30 per cent of their assets from 25 per cent.

On the distribution side, the board has provided greater flexibility. Corporate Agent permitted to tie up to 9 insurers each in life, general and health insurance companies.

Currently, corporate agents are permitted to distribute products of three insurance companies each in the life, health, and general insurance sector.

The agents are allowed to place commercial lines and general insurance covers without any limit on the sum insured.

According to sources, the changes approved by the board would be notified through amendment in relevant regulation are due process. It would take a couple of months for these changes to be

implemented.