The Insurance Regulatory and Development Authority of India (IRDAI) on Friday approved a host of reforms, including easing entry norms and reducing solvency margin that will unlock Rs 3,500 crore of capital for insurers.

The latest decisions are aimed at increasing insurance penetration in the country and enabling insurance for all by 2047.

At its board meeting on Friday, the IRDAI also approved a proposal to permit private equity (PE) funds to invest directly in insurance companies. Besides, the watchdog allowed subsidiary companies to be promoters of insurance companies. According to a statement issued by the IRDAI, a single entity making investment of up to 25 per cent of the paid-up capital and 50 per cent for all investors collectively will be treated as ‘investor’ in insurance companies. Investments over and above that will only be treated as ‘promoter’.

Earlier, the threshold was 10 per cent for individual investors and 25 per cent for all investors collectively. The IRDAI said that a new provision had been introduced to allow promoters to dilute their stake up to 26 per cent, subject to condition that the insurer had satisfactory solvency record for preceding five years and was a listed entity. “The amendments to regulations pertaining to registration of Indian insurance companies are aimed at promoting ease of doing business and simplifying the process of setting up an insurance company in India,” the IRDAI said.

With an objective to allow general insurers to utilise their capital efficiently, the solvency factors related to crop insurance has been reduced to 0.50 from 0.70, which will release the capital requirements for insurers by around Rs 1,460 crore.

In case of life insurers, the factors for calculation of solvency for unit-linked business (without guarantees) have been reduced to 0.60 per cent from 0.80 per cent and for PMJJBY to 0.05 per cent from 0.10 per cent. This would provide a relaxation in capital requirements by around Rs 2,000 crore, the IRDAI said.