Mumbai: The Insurance Regulatory and Development Authority (IRDA) of India has raised the capital requirements (or contribution) for the applicants seeking new broker licence with that of direct brokers up from Rs50 lakh to Rs75 lakh, reinsurance brokers from Rs2 crore to Rs4 crore and for the composite brokers from Rs2.5 core to Rs5 crore.
According to industry sources, the new capital requirements are in line with the expectations in the market though the new capital prescribed for the direct brokers is a tad less than what the market speculated. The regulations are announced after a gap of more than 14 years.
While the capital in the case of a company limited by shares and a cooperative society shall be in the form of equity shares, that for the contribution of partners in the case of LLP firms will only be in cash. The applicant will have to carry on the business of exclusively an insurance broker as required under the regulations.
The new regulations have clarified that the aggregate holdings of equity shares or contribution by foreign investors, including portfolio investors, will be as prescribed by the Central Government from time to time.
The IRDA has also prescribed lower limits for networth that the brokers need to maintain during their licensed period. While the direct brokers need to make sure that the networth doesn’t fall below Rs50 lakh, the reinsurance brokers and composite brokers are required to maintain 50 per cent of the minimum capital requirements or contribution or equivalent amount specified under the regulations.
On the deposit front, while the direct brokers are expected to keep Rs one lakh as deposit with any of the scheduled banks before the commencement of business, the reinsurance and composite brokers need to keep 10 per cent of their minimum capital/ contribution specified under Regulation 19(1) in fixed deposit, which cannot be withdrawn without the prior written permission of IRDA