The much-awaited major reforms in the insurance sector might face further delays, as sources suggest that the pathbreaking Insurance Bill 2023 is unlikely to be passed in the ongoing monsoon session of Parliament. The government has not tabled the bill, which means key proposals, such as composite licensing, differential capital, reduced solvency norms, and the issuance of captive licenses, will remain on hold.
According to the proposed amendments, the minimum paid-up capital requirements for starting general, life, or standalone health insurance businesses would be determined by IRDAI based on the size and scale of operations, class or subclass of insurance business, and the category or type of insurer. This could result in changes to the existing paid-up capital requirements of Rs. 100 crore for general, life, or standalone health insurance businesses and Rs. 200 crore for reinsurance businesses.
The proposal for a composite license would enable an applicant to undertake any type of insurance business, allowing insurers to operate in both life and non-life sectors under a single entity. Similarly, a captive insurance company would empower business groups to establish wholly-owned subsidiary insurers to provide risk mitigation services for their parent companies or related entities.
Previously, there were indications that the government would table the Insurance Bill 2023 during the monsoon session, a move expected to significantly impact the insurance sector. The Department of Financial Services (DFS) had diligently worked on preparing the bill in the last few weeks with hopes of its introduction in the current session. However, it appears that the bill has not been included in the list of the 31 bills the Union government plans to discuss during this Parliament session.
As the insurance sector eagerly awaits further developments, it remains to be seen when the crucial reforms proposed in the Insurance Bill 2023 will come into effect. For now, insurers and industry stakeholders must continue to navigate the existing regulatory framework while keeping a close eye on future updates from the government.
