Insurance sector gets new rulebook: IRDAI revises registration, shareholding and merger norms

The Insurance Regulatory and Development Authority of India (IRDAI) has notified amendments to the rules governing the registration, ownership structure and corporate restructuring of insurance companies, introducing a revised framework for share transfers, mergers and promoter eligibility.

The IRDAI (Registration of Insurers, Capital Structure, Transfer of Shares and Amalgamation) (Amendment) Regulations, 2026, published in the Gazette on July 30, amend the 2024 regulations governing insurer registration, capital structure, transfer of shares, amalgamation and investor eligibility.

The amendments came into effect immediately upon their publication.

Among the key changes, IRDAI has overhauled the framework for prior approval of share transfers.

Regulatory approval will now be required when a shareholder’s holding crosses specified thresholds of 5%, 10%, 25%, 50% and 75%, or when an investor becomes the single largest shareholder.

The regulations also require approval for transfers within promoter groups and empower the regulator to examine structures that may be used to circumvent the prescribed thresholds.

The amendments further clarify that dilution of an existing shareholder’s stake following a fresh issue of equity, where the shareholder does not participate proportionately, will be treated as a transfer event.

IRDAI has also widened the circumstances in which lock-in requirements for shareholding may be relaxed. These now include listing of insurers on Indian stock exchanges, financial distress and mergers or restructuring arising from changes in law.A new framework has also been introduced to facilitate mergers involving insurers and eligible holding companies. Subject to regulatory conditions, a holding company owning more than 50% of an insurer may merge with the insurer. The regulations require that policyholders’ interests remain protected, solvency levels stay above the prescribed control level and the resulting entity continues to undertake only insurance business.

The amendments also revise the rules governing special purpose vehicles (SPVs), allowing them to act as promoters subject to conditions prescribed by the regulator, replacing the earlier, more prescriptive framework.

Further, the regulations strengthen the “fit and proper” assessment for promoters and investors by expanding disclosure requirements relating to ownership, financial strength, source of funds, regulatory track record and governance while updating application formats for insurer registration.

Ramkumar Subramanian, Partner, Financial Services Risk, Grant Thornton Bharat LLP, professional services firm in India providing assurance, tax, and consulting services, said the amendments are largely enabling and market-development oriented. According to him, the revised framework is expected to facilitate new entrants and strategic investments, simplify group structures and support insurers preparing for public listings while retaining safeguards through strengthened fit-and-proper requirements for promoters and investors.

He added that the changes complement the broader reforms in the insurance sector following the move to permit up to 100% foreign direct investment, although investments will continue to be subject to applicable foreign investment regulations.