Corporate and Economic Laws · Laws and Regulations related to Insurance Sector

Registration, Capital and Management of Insurers under the Insurance Act, 1938

Updated 11 October 2026 · Fact-checked

Under the Insurance Act, 1938, an insurer cannot be registered unless it meets minimum capital. Section 6 requires paid-up equity capital of ₹100 crore for life or general insurers, ₹100 crore for exclusive health insurers, and ₹200 crore for exclusive re-insurers. Foreign re-insurer branches need net owned funds of at least ₹5,000 crore. Preliminary expenses are excluded.

Understand Registration, Capital and Management of Insurers

Insurers hold money for policyholders for many years. The law therefore controls who may enter the business. The first gate is registration, and the second gate is capital. An insurer that is not adequately capitalised cannot be registered.

Section 6(1) sets the minimum paid-up equity capital. It applies to an insurer carrying on life insurance, general insurance, health insurance or re-insurance in India. The amount depends on the business. Life or general insurance needs ₹100 crore. An insurer carrying on exclusively health insurance needs ₹100 crore. An insurer carrying on exclusively re-insurance needs ₹200 crore.

Two provisos matter. First, an insurer may enhance its paid-up equity capital, but in accordance with the Companies Act, 2013, the SEBI Act, 1992, their rules, regulations or directions, and any other law in force. Second, when you work out paid-up equity capital, preliminary expenses incurred in the formation and registration of the insurer are excluded. These expenses are as specified by regulations made under the Act.

Section 6(2) deals with a different kind of insurer: one defined in sub-clause (d) of clause (9) of section 2 (the Act's category covering such insurers). Section 6(1) does not apply to it. Instead, it must have net owned funds of not less than ₹5,000 crore before registration. Note the change of test: paid-up equity capital in 6(1), net owned funds in 6(2).

The Authority (IRDAI) fills in the detail through regulations under Section 114A. It may notify regulations consistent with the Act and its rules, to carry out the Act's purposes. Section 114A(2) lists matters such as the manner of applying for registration, determination of preliminary expenses excluded under section 6(1), investment of assets, and valuation of assets and liabilities. Regulations must be laid before Parliament for a total of thirty days. Section 62 adds a related idea: the Central Government can impose reciprocal requirements on insurers of a foreign country.

Key rules to remember

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.

How to solve Registration, Capital and Management of Insurers questions

Use this method for any question on registration, capital or regulation of insurers under the Act.

1Identify the business the insurer carries on: life, general, health, or re-insurance. Note whether health or re-insurance is exclusive.
2Check whether the insurer falls under section 2(9)(d). If yes, apply the net owned funds test of section 6(2). If no, apply section 6(1).
3Pick the capital figure: ₹100 crore for life or general, ₹100 crore for exclusive health, ₹200 crore for exclusive re-insurer, ₹5,000 crore net owned funds for section 2(9)(d).
4Adjust the given capital by removing preliminary expenses of formation and registration, then compare with the minimum.
5State the conclusion plainly: eligible for registration or not, and the shortfall if any.
6If the question asks who fixes the detail, name the Authority's regulation-making power under section 114A and mention the 30-day laying before Parliament.
7Support the answer with the rule in your own words and cite the section only where you are sure.

Quickest way: Three-check method for capital questions

When to use it: Use in MCQs and short case questions where you must decide quickly whether an insurer qualifies for registration.

Check the type: life or general, exclusive health, exclusive re-insurer, or section 2(9)(d) insurer.
Match to the number: 100, 100, 200 crore paid-up equity, or 5,000 crore net owned funds.
Deduct preliminary expenses from paid-up capital before comparing. Then answer.

Common mistakes in Registration, Capital and Management of Insurers

Applying ₹100 crore to a re-insurer.
Students remember one number for all insurers.
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.
Students treat section 6 as one test.
Fix: Section 6(2) uses net owned funds of at least ₹5,000 crore. Section 6(1) uses paid-up equity capital.
Counting preliminary expenses as part of capital.
The proviso is short and easy to skip in numerical cases.
Fix: Always exclude preliminary expenses of formation and registration, as specified by regulations, before the comparison.
Saying the ₹100 crore health figure applies to any insurer that offers health cover.
The word 'exclusively' is missed.
Fix: Clause (ii) applies to a person carrying on exclusively health insurance. A life or general insurer falls under clause (i).
Saying insurers can raise capital freely.
Students overlook the first proviso.
Fix: Enhancement must follow the Companies Act, 2013, the SEBI Act, 1992, their rules, regulations or directions and any other law in force.
Confusing the Authority's regulations with Acts of Parliament.
Both are binding sources of law.
Fix: Regulations under section 114A must be consistent with the Act and rules, and are laid before Parliament for thirty days.

Worked examples

Example 1

Suraksha Health Ltd. wishes to carry on exclusively health insurance. Its paid-up equity capital is ₹108 crore, of which ₹9 crore represents preliminary expenses of formation and registration, as specified by regulations. Can it be registered on the capital test?

Show the solution

Business is exclusively health insurance, so section 6(1)(ii) applies. Minimum is ₹100 crore.
Exclude preliminary expenses: ₹108 crore − ₹9 crore = ₹99 crore.
Compare: ₹99 crore is less than ₹100 crore. Shortfall is ₹1 crore.

Answer: No. Qualifying paid-up equity capital is ₹99 crore, ₹1 crore short of ₹100 crore, so it cannot be registered until capital is enhanced in accordance with the Companies Act, 2013 and other applicable law.

Example 2

Bharat Re Ltd. proposes to carry on exclusively re-insurance business with paid-up equity capital of ₹195 crore, none of it preliminary expenses. It plans to add ₹10 crore by a fresh issue. State whether the requirement will be met after the issue and how the issue must be made.

Show the solution

Exclusive re-insurer: section 6(1)(iii) requires ₹200 crore.
Current capital ₹195 crore is below ₹200 crore, so the requirement is not now met.
After the issue: ₹195 crore + ₹10 crore = ₹205 crore, which is above ₹200 crore, a surplus of ₹5 crore.
Under the first proviso, enhancement must follow the Companies Act, 2013, the SEBI Act, 1992, rules, regulations or directions under them, and any other law in force.

Answer: Yes. After the issue paid-up equity capital is ₹205 crore, which meets the ₹200 crore requirement, provided the issue is made in accordance with the laws named in the first proviso to section 6(1).

Exam tips

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.
For regulation questions, link section 114A to the Authority and state the thirty-day laying before Parliament.
Solvency margin, investment and management rules are not in the text supplied for this page. Revise them from your study material and do not quote section numbers you have not verified.

Practice questions from Laws and Regulations related to Insurance Sector

Registration, Capital and Management of Insurers in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ProfessionalRegistration and Conduct of Insurance Business

Registration, Capital and Management of Insurers: frequently asked questions

What is the minimum paid-up capital to register an insurance company in India?

Under section 6(1) of the Insurance Act, 1938, it is ₹100 crore of paid-up equity capital for life or general insurance and for exclusive health insurance. An exclusive re-insurer needs ₹200 crore.

Are preliminary expenses counted in the capital requirement?

No. The second proviso to section 6(1) says preliminary expenses incurred in formation and registration, as specified by regulations, are excluded when determining paid-up equity capital.

What is the section 6(2) requirement?

An insurer defined in sub-clause (d) of clause (9) of section 2 cannot be registered unless it has net owned funds of at least ₹5,000 crore. It is a net owned funds test, not a paid-up capital test.

Who makes detailed rules on registration and investment of insurers?

The Authority makes regulations under section 114A. These cover matters such as registration applications, preliminary expenses, investment of assets and valuation of assets and liabilities. They are laid before Parliament for thirty days.