Until 2026, an insurance company could not merge with its own parent. The law had no provision for it, and IRDAI had refused the clearest example, the proposal under which Max Life would merge into its non-insurance parent and the combined entity would then merge with HDFC Life. A panel set up by IRDAI in February 2025 had also advised against such mergers on policyholder-risk grounds. Then the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 took effect on February 5, 2026, rewriting Section 35 of the Insurance Act, 1938 to permit a scheme to amalgamate the non-insurance business of any company with the insurance business of an insurer, and amending Section 37 to refer to two or more entities rather than two or more insurers. IRDAI's amendments notified on July 30, 2026, following an exposure draft of June 16, 2026, turned that into a workable route.

Method and data basis

This guide reads the text of the amending regulations as notified, together with the practical analyses of it published by transaction lawyers, and sets out what each condition is designed to prevent. It is not legal advice on a specific scheme. Every condition below is a condition IRDAI enforces, and the first approval under the rule will show how strictly.

The eligibility test: three conditions on the transferor

  • The transferor is either an insurer itself, or a company holding more than 50 percent of the insurer's paid-up equity capital.
  • That holding company carries on no non-insurance business other than holding that insurer, as on the date of the application under Section 35.
  • The scheme is prepared under Section 35 of the Insurance Act.

Read together, these describe one structure and no other: a pure holding vehicle folded into its insurer subsidiary. It is not a general permission for conglomerates to combine.

The five conditions on the amalgamation

  • The policyholders' fund cannot be used at any time to meet any liability, claim or obligation arising out of the amalgamation. This is the protection that matters most, because it is the fund from which claims are paid.
  • The board of the transferee insurer must satisfy itself that the amalgamation will not adversely impact the interests of its policyholders, and must record that view. It is a board certificate, which is a judgement rather than a measurement, and IRDAI's approval is the check on it.
  • Solvency must stay above the control level after the merger, demonstrated to the Authority's satisfaction, and the transferee must comply with extant investment norms.
  • Consideration has one permitted form: equity shares of the transferee insurer issued to the transferor's shareholders. Cash, another insurer's shares and any other instrument are not permitted.
  • Each receiving shareholder must satisfy the Fit and Proper criteria in Schedule 4 of the regulations, as substituted by the same amendment.

What must be true afterwards

The transferee may carry on only the insurance business for which it holds a certificate of registration. Solvency must remain above the control level at all times, and the interest of policyholders must remain protected at all times. Insurance operations must continue to comply with the Insurance Act, the IRDAI Act, the rules, regulations and directions. This is what stops a merged entity from running the insurance company as the funding leg of a wider group.

The approval sequence

An amalgamation is not a single approval. The practical order is: a Section 35 application to IRDAI, IRDAI's prior approval, a scheme document under Sections 230 to 232 of the Companies Act, 2013, sanction by the National Company Law Tribunal, and compliance with the scheme framework of the securities regulator if a listed entity is involved. IRDAI's approval is necessary but not sufficient, and the Companies Act process can take longer than the regulatory one.

The live test case, and why it matters

Max Financial Services, which holds a majority of Axis Max Life, received in-principle board approval on January 28, 2026 to merge into its own subsidiary, with Max Financial's shareholders receiving Axis Max Life shares and the insurer listing directly. The structure fits Regulation 30A on every element: a non-operative transferor, equity-only consideration, a single transferor and one transferee. What an upstream merger of this kind achieves is the removal of the holding-company discount, and in some cases it can bring the operating business to listing without an initial public offering, though minimum public shareholding, promoter classification and disclosure requirements still apply.

What the rule leaves open

  • Structures it does not cover. Mergers with operating group companies, combinations between sister entities, downstream mergers and multi-step schemes are all outside the gateway, even though the amended statute appears to permit them.
  • The Fit and Proper test for a dispersed register. If the transferor is widely held, the insurer cannot diligence every retail shareholder and cannot exclude any of them from a scheme that pays them in shares. The workable reading is that the test applies at the 5 percent threshold and to the promoter group, but IRDAI has not said so. That is an execution risk in exactly the transactions the rule was designed to enable.
  • Sequencing with the wider rulebook. The same amendment rewrote share-transfer approval thresholds to bite at 5, 10, 25, 50 and 75 percent and on becoming the single largest shareholder, caught transfers inside a group and dilution from declining a rights issue, and omitted the old Regulation 25 self-certification route that applied to listed insurers. Listed and unlisted insurers are now on one approval track.

Action

If you are a policyholder, a holding-company merger does not change your policy. The conditions that matter to you are the first three: the policyholders' fund cannot be used, solvency must stay above the control level, and the board must certify no adverse impact. If you want to know whether they held, the solvency margin disclosed in the insurer's financial statements, before and after the scheme, is the number to compare. If you are advising a company on structure, the questions worth answering before drafting are whether the transferor genuinely has no other business at the application date, whether the shareholder register is workable against the Fit and Proper criteria, and whether the sequencing holds if the NCLT timetable moves. Watch item: the first scheme to complete under the rule, and whether IRDAI issues guidance clarifying the Fit and Proper threshold for widely held transferors.