An insurer may now merge with a non-insurance company, but only within narrow limits. On July 30, 2026, the Insurance Regulatory and Development Authority of India (“IRDAI”) notified amendments to the IRDAI (Registration, Capital Structure, Transfer of Shares and Amalgamation of Insurers) Regulations, 2024 (the “Registration Regulations”) creating an express pathway for such an amalgamation. The gateway is confined to a holding company whose only business is holding the insurer, with consideration in equity shares alone. This article explains the change, its consequences for transaction design and the questions it leaves open.

The amendments followed an exposure draft of 16 June 2026, on which comments closed on 06 July 2026. They operationalised one of the central reforms of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 (the “Amendment Act”), which is the merger of a non-insurance entity with an insurer.

The lacuna was exposed in 2016–17, when Max Life Insurance Company was to merge into its listed parent, Max Financial Services, as part of the larger HDFC Life transaction. The IRDAI rejected the proposal, holding that Section 35 of the Insurance Act, 1938 (“Insurance Act”) contemplated amalgamation only between insurers. Restructurings touching an insurer thereafter kept non-insurance entities outside the perimeter.

The issue came up again in IRDAI v. Shriram General Insurance Company Ltd. On March 10, 2025, the National Company Law Appellate Tribunal held that Section 35 does not prohibit an insurer from amalgamating with a non-insurance company under Sections 230 to 232 of the Companies Act, 2013 (“Companies Act”). In other words, company law allowed what the sectoral regulator had resisted.

In force from February 5, 2026, the Amendment Act rewrote Section 35 to permit a scheme to amalgamate the non-insurance business of any company with the insurance business of an insurer. Section 37, correspondingly, now refers to two or more entities instead of two or more insurers. In doing so, Parliament accepted the result which the Tribunal had reached but handed back to the regulator the gatekeeping role that the ruling had taken away. The change is part of a broader liberalisation that has also raised the foreign investment ceiling up to 100 per cent and the approval threshold for share transfers from 1 to 5 per cent.

The defining feature of the new Regulation 30A is how narrow this gateway is. The transferor has to be either an insurer or a company that holds more than 50 per cent of the insurer’s paid-up equity capital, and, as at the date of the Section 35 application, it must carry on no non-insurance business beyond holding that insurer [Regulation 30A of the Registration Regulations]. This does not support conglomerate combinations; at most, it allows a holding vehicle to be folded into its insurer subsidiary, and little more.

The conditions that follow are equally tight:

• consideration may take one form only — equity shares of the transferee insurer issued to the transferor’s shareholders, each of whom must satisfy the fit and proper criteria; [Regulation 30A(2)(e) of the Registration Regulations]

• the board must be satisfied that policyholders are not adversely affected [Regulation 30A(2)(b) of the Registration Regulation], solvency must remain above the control level [Regulation 30A(2)(c) of the Registration Regulation], and investment norms must be met; [Regulation 30A(2)(d) of the Registration Regulation]

• the policyholders’ fund may not at any time meet a liability arising out of the amalgamation; and [Regulation 30A(2)(a) of the Registration Regulation]

• the insurer must thereafter carry on only its registered business [Regulation 30A(3)(a) of the Registration Regulation].

The thresholds that trigger approval for share transfers have also been reworked. Prior approval is now required when the transferee’s holding crosses 5, 10, 25, 50 or 75 per cent, or when it becomes the single largest shareholder, as well as on any disposal of more than 5 per cent of paid-up capital in a financial year. Transfers within a group, and dilution that results from declining a rights issue, are caught as well [Regulation 21 of the Registration Regulation].

The groups that stand to gain first are those where an insurer sits under a holding company that has no other business. An upstream merger takes out the intermediate layer, deals with the holding company discount and, in some situations, can effectively bring the operating business to listing without an initial public offering, though this structure would remain subject to minimum public shareholding, promoter classification and disclosure requirements.

The framework has a primed candidate. Max Financial Services Limited, which holds a majority of Axis Max Life Insurance Limited (“AMLI”), received in-principle board approval on 28 January 2026 to merge into its own subsidiary. Under the proposed structure, its shareholders will receive AMLI shares and the insurer will list directly. The structure appears to be a perfect fit for Regulation 30A, involving a non-operative holding company, equity-only consideration, and a single transferor and one transferee.

Where sponsors hold their insurer investments through special purpose vehicles, unwinding the vehicle before an exit can convert an indirect stake into a direct, and possibly listed, shareholding. Two features matter here:

(a) equity-only consideration means debt at the holding company level must be discharged or restructured rather than cashed out through the scheme; and

(b) fit and proper requirements bring the wider shareholding structure with the scope of diligence.

Fit and proper testing works where the transferor is closely held; it is impractical where the transferor is listed with a dispersed register, since the insurer can neither diligence every retail holder nor exclude them from a scheme that pays them in shares. The reasonable reading is that the criteria are tested on shareholders crossing the 5 per cent threshold and on the promoter group. Until the IRDAI clarifies this position, that is an apparent execution risk precisely in the transactions which the framework intended to facilitate.

The sequence of steps is critical: The amalgamation would be carried out through a scheme under Sections 230 to 232 of the Companies Act, which calls for both the sanction of the National Company Law Tribunal and IRDAI’s prior approval. If a listed entity is involved, the scheme framework of the relevant securities regulator would also have to be complied with.

This narrow gateway leaves out several restructurings that the parent statute appears to allow: mergers with operating group companies, combinations between sister entities, downstream mergers and multi-step schemes. The gap between Sections 35 and 37 of the Insurance Act on one side and Regulation 30A on the other is the most likely focus of the next set of representations. Two questions remain untested:

(a) how much pre-application housekeeping will the IRDAI tolerate under the no-other-business test; and

(b) how transferor shareholders failing the fit and proper test are to be treated.

Though narrow in scope, the framework brings a decade-long impasse to an end. The question is no longer whether insurer–non-insurer mergers are possible, but whether the conditions are being met. Insurance groups carrying legacy holding structures, as well as sponsors considering entries or exits, can now assses their structures against a clearer rulebook. The first approval under Regulation 30A is likely to set the tone.

About the author: Swapnil Phadnis is a Partner at TLH, Advocates & Solicitors.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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