The government is discussing with the Insurance Regulatory and Development Authority of India (IRDAI) regarding minimum entry capital requirement for setting up an insurance venture, along with tax sops and lower solvency margin or extra capital requirements.
At present a minimum investment of Rs 100 crore is required to set up an insurance firm. For setting up a small finance bank is Rs 300 crore while it is Rs1,000 crore for universal banks. In April, IRDAI chairman Debasish Panda had said the regulator is thinking of allowing micro insurance players with Rs10 crore or Rs15 crore capital which can work in focus areas.
Earlier, a committee constituted by IRDAI, suggested to allow mini or monoline insurance company on regional basis with lower capital of around Rs 20 crore. Solvency margin requirements could be pegged at 100%. It added that for these firms a minimum retention of 10% could be stipulated and balance portfolio can be ceded to direct insurers.
Further, IRDAI had suggested that these companies can be given tax shelter for the first 10 years of operations and allowed lower solvency capital of Rs 50 crore with reinsurance covers. “The investment policies can also be guided towards 50% to be invested in special state bonds backed up by central bonds.” said a government official.
The move will help widen the reach of the insurance industry and pave the way for regional and mini insurers with limited product offerings, official said. However, “These are preliminary discussions. Any changes will require amendment in the Insurance Act, which will be taken up once a structure is finalised,” the official added.
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