Only Vanilla Capital for Indian Insurers

Tuhin S. Banerjee, Senior Consultant (tuhin_banerjee@infosys.com) and Shefali Sonpar, Consultant (shefali_sonpar@infosys.com), Infosys Technologies Limited

Introduction

The Insurance Regulatory and Development Authority (IRDA) of India have clarified to all insurers, re-insurers and intermediaries that they may issue only equity shares. They are not permitted to issue preference shares or any hybrid instruments. IRDA has also specified that transfers of shares, including through renunciation of rights, amounting to five percent or greater to any other entity shall be done only with the previous approval of the Authority. However this limit is further restricted to only 2.5% in case the other entity is a banking or an investment company.