IRDAI Exposure Draft Proposes Changes to Insurer Registration, Share-Transfer Thresholds, Mergers With Non-Insurance Holding Companies and Naming Rules

India's insurance regulator has proposed a broad rewrite of the rules on who can own insurers and how they can be combined. The Insurance Regulatory and Development Authority of India (IRDAI) released an exposure draft of the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) (First Amendment) Regulations, 2026. Public comments close on July 6, 2026, according to Business Standard and a client alert by the law firm Cyril Amarchand Mangaldas, which analyses the draft. This article summarises the law firm's description of the proposals. An earlier version of this article said that the proposals included reduced transaction fees and followed India's move to allow 100% foreign investment. The analysis we reviewed does not mention fees or those links, so both points have been removed. These are proposals only; they take effect, if at all, after consultation and publication in the Official Gazette.

What is proposed for mergers? A new Regulation 30A would allow a non-insurance company to amalgamate with its insurer subsidiary if it is a non-operative holding company. It must hold more than 50% of the insurer's equity and have no business operations. The scheme would be prepared under Section 35 of the Insurance Act, 1938, and the insurer would be the surviving (transferee) entity. Consideration would be limited to the insurer's equity shares issued to the transferor's shareholders, with fractional entitlements paid in cash. Policyholders' funds could not be used for liabilities or obligations arising from the amalgamation, the insurer's solvency would have to stay above control level at all times, and after the merger the insurer could conduct only the insurance business it is registered for. Incoming shareholders would need to meet fit-and-proper criteria, a point the law firm says raises questions where shareholdings are dispersed or listed.

How would share-transfer approvals change? The draft would replace Regulation 21. For a holding of 5% or less, prior approval would still be needed if the holding is likely to exceed 5%. For a holding above 5%, prior approval would be needed whenever a transfer takes the holding past any 5% multiple, such as 10%, 15% or 20%. The previous rule was tied to each further 5% increase within a financial year. The threshold for shares transferred by a transferor would rise from 1% to 5% of paid-up equity capital per financial year. Intra-group transfers would expressly need prior approval. In a fresh issue, a pro-rata fall in a shareholder's holding from not subscribing would be treated as shares intended to be transferred. For listed insurers, the self-certification route for transfers of 1% to 5% in Regulation 25 would be omitted.

What about promoters and special purpose vehicles? The draft would allow a special purpose vehicle to be a promoter on satisfaction of the Authority, and delete the requirement for a valuation certificate from a SEBI-registered Category-I merchant banker, though the law firm argues it may survive through another provision. Fit-and-proper and minimum paid-up capital requirements would remain. Foreign promoters and foreign SPVs could be entities incorporated in a FATF-compliant jurisdiction. FATF is the Financial Action Task Force, the global body that sets standards against money laundering. The law firm notes that the term FATF-compliant jurisdiction is not defined and suggests a negative-list definition. It also notes the express exclusion of individuals from the foreign promoter definition is deleted, which creates ambiguity. Regulation 50 would codify a September 6, 2024 IRDAI circular allowing subscribers of other forms of capital to be entities from India or FATF-compliant jurisdictions.

What are the naming rules? A new Regulation 56A would reserve the words insurance, insurer, assurance, reinsurance, insurance company and derivatives for insurers, and require insurance businesses to use at least one such word. Existing insurers would have 12 months from notification to comply, and a no-objection certificate from the competent authority would be required for any name change.

What do the proposals mean? Supporters would likely see clearer thresholds and a path for holding company mergers as ease-of-doing-business reforms. Critics might worry about the effect on regulatory oversight of new owners and about how fit-and-proper tests apply to dispersed holdings. The law firm's alert raises several drafting questions, including undefined terms. We do not have the industry's responses, which are not yet public.

What should readers watch? The key dates are the July 6 comment deadline and the final regulations. Insurers, promoters and investors with holding company structures are most directly affected. Policyholders are not directly affected by the draft, and the proposed protection of policyholder funds in mergers is intended to keep it that way.

Because the law firm's alert is itself an interpretation, and because exposure drafts are often revised after comments, the details above may change before any rules are final.

This article summarises a draft regulation as described by a law firm and a news report. It is not legal advice, and readers should consult the exposure draft itself.