Question 1

100 percent FDI in insurance means premiums collected in India can be freely invested in foreign markets.

Accepted Answer

The government mandated strict guardrails ensuring that companies with 100 percent FDI must invest the entirety of their collected premiums within India.

Question 2

Composite licensing means all insurance policies (life, health, auto) will be merged into a single mandatory product for the consumer.

Accepted Answer

Composite licensing simply allows a single corporate entity to underwrite and sell different classes of insurance under one regulatory license. Consumers can still buy separate or bundled products based on their individual choice.

Question 3

The amendment allows foreign life insurance companies to operate directly in India through branch offices without setting up an Indian subsidiary.

Accepted Answer

Only foreign 'reinsurers' (like Lloyd's) are permitted to operate via branches. Direct life or general insurance business still requires the entity to be incorporated in India, even if it is a 100 percent foreign-owned subsidiary.

Question 4

Consider the following statements regarding the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025:
1. It permits foreign reinsurers to set up branches in India with a reduced net owned fund requirement of Rs 1,000 crore.
2. It amends the Insurance Act 1938 to introduce composite licensing, allowing a single corporate entity to underwrite both life and non-life insurance.
3. Under the revised Foreign Investment Rules 2025, the majority of the board of directors of an Indian insurance company must be resident Indian citizens.

How many of the statements given above are correct?

Accepted Answer

(b) Only two — Statement 1 is correct: The net owned fund requirement for foreign reinsurers was reduced from Rs 5,000 crore to Rs 1,000 crore under Section 6 of the Insurance Act. Statement 2 is correct: The Act introduces composite licensing, ending the strict compartmentalization of life, health, and general insurance. Statement 3 is incorrect: The previous rule requiring a majority of the board to be resident Indian citizens was relaxed; the new rule mandates that only at least one among the CEO, Managing Director, or Chairperson must be a resident Indian citizen.

Question 5

Match List I (Provisions under the Insurance Laws Amendment Act 2025) with List II (Specific Regulatory Changes):

List I:
A. Share transfer without IRDAI prior approval
B. Net Owned Funds for foreign reinsurers
C. Insurance intermediary registration validity
D. Foreign Direct Investment under automatic route

List II:
1. Limit raised to 5 percent of paid-up equity capital
2. Requirement reduced to Rs 1,000 crore
3. Granted in perpetuity subject to annual fees
4. Cap increased to 100 percent

Select the correct answer using the code given below:

Accepted Answer

(b) A-1, B-2, C-3, D-4 — A matches 1: The threshold for share transfers requiring prior IRDAI approval was increased from 1 percent to 5 percent. B matches 2: Net owned funds for foreign reinsurers were slashed from Rs 5,000 crore to Rs 1,000 crore. C matches 3: The 3-year renewal cycle for intermediaries was scrapped in favor of perpetual one-time registration with an annual fee. D matches 4: FDI was increased from 74 percent to 100 percent under the automatic route.

Question 6

Assertion (A): The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 introduces composite licensing for insurance companies in India.
Reason (R): The introduction of composite licensing aims to restrict insurers to specific segments to ensure specialized underwriting and prevent cross-sector systemic risks.

Select the correct answer using the code given below:

Accepted Answer

(c) A is true but R is false — Assertion (A) is true as the 2025 Act explicitly introduces the composite licensing framework. Reason (R) is false because composite licensing does the exact opposite of restricting insurers; it breaks down regulatory silos, allowing a single entity to offer life, health, and general insurance products under one roof, thereby improving efficiency and enabling bundled products.

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