Insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) may tighten licence regulations and will favour candidates that can withstand crises, according to a report by Mint quoting sources including a government official.
A source on condition of anonymity told the publication that only companies that are financially strong enough, even during liquidity phases for at least five years, may be able to obtain a licence to start an insurance company or acquire one.
“Capital requirement norms and exposure parameters of promoters may need to be strengthened. Stronger promoter financials should be the new licence criteria," another source told the publication.
Running an insurance company requires a constant infusion of capital in the first few years as office operations, starting sales among other operations would cost companies a lot. The regulator feels that initial capital is important to bear expenses, settle claims in the first five years of operation in case any of the joint venture partners cannot pump in more capital when required.
Insurers are currently required to have a minimum paid-up capital of Rs 100 crore, but Irdai feels that this number must go up so that the insurance company has enough capital to remain in operation for fives years with the need for additional capital, as per the report.