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Insurers that raise capital through the issue of debentures must create a Debenture Redemption Reserve under the Companies Act, 2013. The reserve must equal twenty five percent of the value of outstanding debentures. Insurers must ignore the Debenture Redemption Reserve when they compute the solvency margin and ratio. The reserve does not count as a liability for solvency calculations.
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[Image omitted. See the official document.]
Ref.: IRDA/F&A/OFC/01/2014-15 / 115
Date: 04.08.2017
To, CMDs/ CEOs of All Insurers
Sub: Creation of Debenture Redemption Reserve
The Authority had permitted insurers to raise Capital in other forms such as Preference Shares and Subordinated Debt, by issue of IRDAI (Other Forms of Capital) Regulations, 2015. Pursuant to the same, some insurers had approached the Authority with proposals for raising capital in other forms and were granted approvals in terms of the Regulations.
Some insurers have issued debentures to raise capital and have approached the Authority seeking clarification whether they are required to create Debenture Redemption Reserve as envisaged in Section 71 of the Companies Act, 2013. In this regard, the Authority is inclined to advise as below:
This clarification is issued under the IRDAI (Other Forms of Capital) Regulations, 2015.
[Image omitted. See the official document.]
(Dr Mamta Suri) HOD-F&A
परििश्रम भवन, तीसरा तल, बशीरबाग, हैदराबाद-500 004. भारत (1) : 91-040-2338 1100, फैक्स: 91-040-6682 3334 ई-मेल: irda@irda.gov.in वेब: www.irda.gov.in
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