CMA Final · Corporate and Economic Laws

Laws and Regulations related to Insurance Sector: formula sheet

Full chapter guide

Key formulas

Eligible forms of insurer (section 2C(1)): Public company | co-operative society | statutory body of Parliament | foreign re-insurer branch (re-insurance only); Any other form cannot begin or continue insurance business. A private company is not on the list.
Foreign entities (section 2C provisos): Only an Indian insurance company may begin insurance business after the IRDA Act, 1999; foreign bodies may do re-insurance only; The foreign re-insurer must set up a branch in India exclusively for re-insurance.
Exemption by Central Government: Notification in Official Gazette; general insurance exemption ≤ 3 years at one time; notification laid before Parliament; Exemption covers superannuation allowances and annuities, or general insurance. Section 2C(2) requires laying before Parliament.
Use of name (section 2C(4)): Only an insurer may use 'insurance', 'insurer', 'assurance', 're-insurance', 'insurance company' or derivatives; An insurer must use at least one such word in its name, as specified by regulations.
Councils (section 64C): Life Insurance Council = life insurers; General Insurance Council = general, health and re-insurance insurers; Both are deemed constituted under the Act from its commencement.
Executive Committee (section 64F): Each has 4 elected members + 1 eminent person nominated by the Authority + nominees for agents, intermediaries and others; Life: 3 nominees for agents, intermediaries, policyholders, plus 1 each from self-help groups and insurance co-operative societies. General: 4 nominees for agents, TPAs, surveyors and loss assessors, and policyholders. Chairperson is one of the 4 elected members.
Obligations (sections 32C, 32D, 40C): Rural/unorganised/backward classes cover; minimum motor third party share; furnish expenses of management details to the Authority; Section 32D applies to general insurers; the Authority may exempt insurers mainly in health, re-insurance, agriculture or export credit guarantee.
Minimum paid-up equity capital: life or general insurer: ₹100 crore; Section 6(1)(i). Applies to an insurer carrying on life insurance or general insurance business.
Minimum paid-up equity capital: exclusive health insurer: ₹100 crore; Section 6(1)(ii). Applies only to a person carrying on exclusively health insurance.
Minimum paid-up equity capital: exclusive re-insurer: ₹200 crore; Section 6(1)(iii). Applies only to a person carrying on exclusively the business of re-insurance.
Net owned funds for section 2(9)(d) insurer: Net owned funds ≥ ₹5,000 crore; Section 6(2). This is the test for the insurer defined in sub-clause (d) of clause (9) of section 2. It is not a paid-up capital test.
Paid-up equity capital for section 6 test: Paid-up equity capital − preliminary expenses (as specified by regulations); Second proviso to section 6(1). Preliminary expenses of formation and registration are excluded.
Regulations laid before Parliament: 30 days (one session or two or more successive sessions); Section 114A(3). Parliament may modify a regulation or agree it should not be made.
Who may apply (S.14C(1)): Insurer → application to IRDAI, in the form specified by regulations, in connection with a policy issued or proposed to be issued; The applicant is the insurer. The person whose data is sought does not apply.
Consent condition (S.14C(2)): Processing only after insurer confirms the person's consent, including preservation of evidence of consent; Processing is within the period specified by regulations. Consent is a precondition, not an afterthought.
Furnishing (S.14C(3)): IRDAI furnishes the policy related information specified in the application, as may be in its possession; It cannot give what it does not hold.
Proviso to S.14C(3): Information furnished shall not disclose the names of the insurer or other regulated entities that submitted it; Source anonymity is protected.
Fees (S.14C(4)): IRDAI may levy such fees as it deems fit for each application; Fee is per application.
Confidentiality link (S.14D(1)): Information furnished under S.14C is confidential; not to be published or disclosed except for the specified intended purposes; Exceptions are in S.14D(2). Courts cannot compel production under S.14D(3).
Section 32B: base duty: Every insurer must undertake the specified percentages of life and general business in the rural and social sectors; Percentages are specified by the Authority in the Official Gazette. The Act does not fix them.
Section 32C: persons covered: Rural residents + unorganised or informal sector workers + economically vulnerable or backward classes + other categories specified by regulations; Policies must include insurance for crops. Applies to life and general insurers.
Section 32D: motor third party: General insurer must underwrite the minimum percentage of motor third party business specified by regulations; Applies to insurers carrying on general insurance business. The Authority may exempt insurers primarily in health, re-insurance, agriculture or export credit guarantee.
Section 105B: penalty: Penalty ≤ ₹25 crore for failure to comply with Sections 32B, 32C and 32D; It is a ceiling (not exceeding), not a fixed amount.
Section 114A(2)(id) and (ie): regulation power: Authority makes regulations on rural, social, unorganised sector and backward class obligations, and on the motor third party percentage; Explains why the percentages come from regulations.
Section 28, IRDA Act, 1999: IRDA Act provisions = in addition to, and not in derogation of, any other law for the time being in force; The IRDA Act adds to other laws. It does not override or reduce them.
Section 28, Insurance Act, 1938: Every insurer submits to the Authority returns of investments made, in the form, time and manner specified by the regulations; Different Act, different rule. Do not confuse it with the IRDA Act section.
Section 31, Insurance Act: Assets in India are kept in the name of a public officer approved by the Authority, or in the corporate name of the undertaking; Assets required to be vested in trustees under section 27(7) are an exception. Endorsing a security to a banking company solely for collection or realisation of interest, bonus or dividend is allowed.
Section 64V, Insurance Act: Assets valued at not more than market or realisable value; every liability properly valued; statement as on 31 March certified by an approved auditor (general insurance) or approved actuary (life insurance); The statement is furnished to the Authority along with the returns.
Section 109, Insurance Act: No court takes cognizance of an offence under the Act, rules or regulations except on a complaint by an officer of the Authority or a person it authorises; This controls who can start a prosecution.
Section 110D, Insurance Act: No right to compensation for loss caused by sections 34, 34A, 34E, 37A or by complying with an order or direction under the Act; Compliance with an order under the Act does not give a claim for compensation.
Section 58, Insurance Act: Partial winding up: wind up one class of business while other classes continue or are transferred, through a scheme confirmed by the Tribunal; The scheme must provide for allocation of assets and liabilities and future rights of each class of policyholders.
Legal status of the Authority (section 3): Body corporate + perpetual succession + common seal; can hold property, contract, sue and be sued; Head office is where the Central Government decides. The Authority itself may open offices at other places in India.
Composition (section 4): Chairperson + not more than 5 whole-time members + not more than 4 part-time members; All are appointed by the Central Government from persons of ability, integrity and standing with relevant knowledge or experience. Do not give fixed numbers.
Statutory duty (section 14): Regulate + promote + ensure orderly growth of insurance business and re-insurance business; Quote all three verbs and both businesses, insurance and re-insurance.
Rural and social sector obligation (Insurance Act, section 32B): Every insurer must undertake the percentages specified by the Authority in the Official Gazette; Applies to both life and general insurance business.
Delegation by Chairperson (Insurance Act, section 110A): General or special order; to a subordinate; subject to conditions; under Chairperson's control and revision; Delegation does not remove the Chairperson's power to control and revise.
Foreign insurer filing (Insurance Act, section 63): File with the Authority within 3 months of establishing a place of business or appointing a representative in India; Any later change in the filed particulars must be furnished forthwith.
Insurance Advisory Committee: size: Members ≤ 25, excluding ex officio members (IRDA Act, section 25(2)); The limit excludes the ex officio members. Do not say 25 including the Authority's members.
Insurance Advisory Committee: chair and object: Chairperson of the Authority = ex officio Chairperson; object = advise on making regulations under section 26; Section 25(3) and (4). Section 25(5) allows advice on other prescribed matters.
Establishment of the Committee: Authority establishes it by notification, effective from the date it specifies; Section 25(1). The word is 'may', so establishment is discretionary.
Audit of the Authority: Accounts audited by the CAG; report forwarded to the Central Government; laid before each House of Parliament; Section 17(2) and (4). The Authority pays the audit expenses.
Annual accounts form: Form prescribed by the Central Government in consultation with the CAG; Section 17(1).
Insurer audit under the Insurance Act: Annual audit of the four statements unless audited under the Companies Act, 2013; auditor has section 147 powers of that Act; Insurance Act, section 12.
Separate accounts and funds: One account per class; separate life insurance fund; fund usable only for life business; Insurance Act, section 10(1), (2) and (3).
Advisory Committee under the Insurance Act: Not more than five persons; formed by the Authority with previous Central Government approval; Section 101B. Do not confuse it with the IRDA Act section 25 committee.

Quick revision

The Insurance Act, 1938 governs insurers and the insurance business; the IRDA Act, 1999 governs the regulator.
Section 28 of the Insurance Act: every insurer must submit returns on investments, in the form, time and manner specified by regulations.
Section 114A: the Authority makes regulations by notification in the Official Gazette, consistent with the Act and its rules.
Regulations are laid before each House of Parliament for a total of thirty days, in one session or in successive sessions.
Section 32B: every insurer undertakes specified percentages of life and general insurance business in the rural and social sectors.
Section 32C: insurers discharge the Section 32B obligations for rural residents, unorganised sector workers and economically vulnerable or backward classes, and these policies include crop insurance.
Section 32D: every general insurer underwrites a minimum percentage of motor third party risks as specified by regulations.
Under Section 32D, the Authority may exempt insurers primarily in health, re-insurance, agriculture or export credit guarantee business.
Section 14C of the IRDA Act (in force from 5 February 2026): the insurer applies to the Authority for policyholder and policy related information.
Under Section 14C, the Authority processes the application only after the insurer confirms the person's consent, and the information furnished must not name the insurer or other regulated entity that submitted it.
Under Section 14C, the Authority may levy a fee for each application.
Always match each section number to the correct Act before writing it.

Common mistakes

Treating a private company as eligible to carry on insurance business. Fix: Recall the list in 2C(1): public company, co-operative society, statutory body, foreign re-insurer branch.
Saying foreign insurers may carry on any class of insurance business in India through a branch. Fix: The branch route is for re-insurance exclusively. Other foreign insurance business is barred.
Applying ₹100 crore to a re-insurer. Fix: Link ₹200 crore with exclusive re-insurance. Life, general and exclusive health are ₹100 crore.
Using paid-up equity capital for the section 2(9)(d) insurer. Fix: Section 6(2) uses net owned funds of at least ₹5,000 crore. Section 6(1) uses paid-up equity capital.
Writing that Section 14C belongs to the Insurance Act, 1938. Fix: Write IRDA Act, 1999, Section 14C. Section 39 and Section 18 belong to the 1938 Act.
Saying the policyholder applies to IRDAI. Fix: Section 14C(1) says the insurer makes the application.
Saying Section 32C applies only to life insurers. Fix: The section says every insurer must provide life or general insurance policies. Crop insurance is general insurance, and the section expressly includes it.
Quoting a fixed percentage for rural or motor third party business as written in the Act. Fix: State that the percentage is as specified by the Authority. The Act leaves the figure to the Gazette notification or regulations.
Treating Section 28 of the Insurance Act, 1938 as the 'other laws not barred' section. Fix: Link 'other laws not barred' to the IRDA Act, 1999. Link investment returns to Insurance Act section 28.
Saying the IRDA Act overrides all other laws. Fix: Section 28 says the opposite: it is in addition to, not in derogation of, other laws.

Exam tips

Learn the list in section 2C(1) as a short set of four forms; MCQs often test which entity is not eligible.
Remember that the General Insurance Council covers general, health and re-insurance. This is a favourite one-line question.
Note the three-year cap on general insurance exemption notifications and that notifications are laid before Parliament.
Give a section number only if sure. Marks go to the rule and its application, not to a guessed number.
In case scenarios, state the entity, the class and your conclusion in the first two lines.
Memorise the three section 6(1) figures with their business types, and the separate ₹5,000 crore net owned funds rule in section 6(2).
In case-based MCQs, look for the words 'exclusively' and 'preliminary expenses'. They decide the answer.
Do not give the capital figure alone. Add one line that preliminary expenses are excluded and enhancement follows other laws.