We are pleased to present the August-September 2026 edition of our Insurance Law Newsletter, covering key developments in India’s insurance regulatory landscape, along with noteworthy developments from Europe and the derivatives markets. Insurance distribution remains a key regulatory theme this month, with the Insurance Regulatory and Development Authority (“IRDAI”) proposing wide-ranging reforms to the structure and economics of insurance distribution, alongside changes to investment, reporting and reinsurance filing requirements and enforcement actions concerning mis-selling, outsourcing and governance lapses. The Supreme Court has also clarified when additional insurance risk can attach, reiterating the statutory requirement for payment of premium before such risk is assumed. In Beyond India, we examine developments in EU insurance supervision, including proposed common standards for insurance guarantee schemes and emerging risks identified by European supervisors, as well as recent developments from the International Swaps and Derivatives Association (“ISDA”) relating to variation margin collateral, the digital representation of legal agreements and the governance framework for the standard initial margin model. So, sit back, enjoy your favourite beverage, and explore the latest developments shaping the insurance and derivatives legal landscape.
The law develops
IRDAI Proposes Reforms to Recalibrate Economics of Insurance Distribution
IRDAI released the consultation paper “Recalibrating Economics of Insurance Distribution” on September 23, 2026, proposing reforms to simplify the distribution framework, ease entry and capital requirements, rationalize expenses of management and revise distribution commissions. The proposals also seek greater transparency in product pricing, safeguards against compulsory bundling and measures to address mis-selling. IRDAI further proposed digital Market Infrastructure Institutions, including Bima Sugam, and a Public Insurance Registry to facilitate transparent and digital insurance transactions. Stakeholders may submit comments by October 25, 2026.
IRDAI Repeals Guidelines on Repatriation of Dividend by Foreign-Owned Insurance Intermediaries
IRDAI, vide circular dated September 22, 2026, has repealed the Guidelines on Repatriation of Dividends by Insurance Intermediaries having majority by foreign investors, with effect from July 30, 2026. The repeal follows the IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2026, notified on July 30, 2026 to align the regulatory framework with the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 and the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025. Among other changes, the IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2026 removed the requirement of prior IRDAI approval for repatriation of dividends by such intermediaries, as well as the condition on related-party payments, rendering the 2020 Guidelines redundant.
Read: IRDAI Circular on Repatriation of Dividends by Foreign-Owned Insurance Intermediaries
IRDAI Delegates Powers for Imposition of Penalties and Issuance of Directions
IRDAI vide notification dated September 10, 2026, has delegated specified powers for imposition of penalties and issuance of directions under the Insurance Act, 1938, in exercise of its powers under Section 23(1) of the IRDAI Act, 1999. Directions in enforcement proceedings may now be issued by the Chairperson or a Whole-Time Member, while penalties may be imposed by a Whole-Time Member, a panel comprising the Chairperson and a Whole-Time Member, or a panel of two Whole-Time Members, as decided by the Chairperson. The delegated penalties cover failures to furnish documents or reports, comply with directions, maintain the required solvency margin or comply with directions on insurance treaties, as well as contraventions relating to Sections 27 and 27E, adjudicating officers’ inquiry reports, corporate-agent requirements and insurance repository guidelines. Directions on all other matters under Section 34 continue to rest with the Chairperson.
Read: IRDAI Delegates Powers for Penalties and Directions
State of play
Reinsurance filings move to integrated BAP
IRDAI’s, vide circular dated August 28, 2026, has migrated reinsurance regulatory returns, Reinsurance Summary Formats and File Reference Number applications for Cross Border Reinsurers to its upgraded Business Analytics Platform (“BAP”). Applications relating to the appointment and remuneration of CEOs/KMPs of reinsurers and Foreign Reinsurer Branches have also been integrated into the upgraded BAP platform. Reinsurance regulatory returns are to be submitted on the BAP from FY 2024–25, while Reinsurance Programme Summary Returns apply from FY 2026–27. Operational guidelines and instructions are available on the BAP portal.
Read: IRDAI Integrates Reinsurance Filings into BAP
IRDAI Permits Insurers to Invest in New Development Bank’s Onshore Rupee Bonds
IRDAI, vide circular dated August 27, 2026, has permitted insurers to invest in Onshore Rupee Bonds issued by the New Development Bank as “Approved Investments”. The bonds are subject to applicable Government of India norms and the SEBI approval obtained for the public issue, as well as compliance with Section 27E of the Insurance Act, 1938 and the prescribed rating criteria under the IRDAI (Actuarial, Finance and Investment Functions of Insurers) Regulations, 2024. Where the proceeds are invested in infrastructure sub-sectors covered under the Ministry of Finance’s Harmonized Master List, such investments will qualify as “infrastructure investments”. IRDAI has prescribed EORB as the category code for approved onshore rupee bonds and IORB where such bonds qualify as infrastructure approved investments (with corresponding codes OORB and IOOB for these bonds where they fall under “Other Investments” instead).
Read: IRDAI Circular on Investment in New Development Bank’s Onshore Rupee Bonds
Monthly data for the Index of Service Production
IRDAI, vide circular dated August 7, 2026, has required life, general and health insurers to submit monthly data to support the Ministry of Statistics and Programme Implementation’s Index of Service Production. From July 2026, general and health insurers (excluding reinsurers) must report gross direct premium, claims paid and investment income, while life insurers must report gross premium, benefits paid and investment income. This data is to be submitted through NIC online templates by the 15th of the following month. IRDAI has clarified that the requirement is solely for ISP data collection and does not alter existing financial statement disclosure or preparation requirements under the applicable laws.
Read: IRDAI Requires Monthly Data for Index of Service Production
From the docket
Premium paid later cannot retrospectively extend insurance cover
The Supreme Court, in The New India Assurance Co. Ltd. v. Louis Dreyfus Commodities India Pvt. Ltd., on August 18, 2026, allowed the insurer’s appeals under Section 23 of the Consumer Protection Act, 1986 against an NCDRC order, holding that cover under a Marine Cargo Annual Turnover Policy could not be retrospectively extended after the insured’s turnover had exceeded the policy limit. Applying Section 64VB of the Insurance Act, 1938, the Court held that additional risk could attach only upon payment of the additional premium. The subsequent endorsement, issued after the November 2010 loss, was effective only from December 17, 2010. The Court also rejected reliance on an officer’s earlier assurance, holding that his authority to administer or explain the policy did not extend to enlarging the insurer’s risk or overriding a statutory requirement.
Read: Supreme Court, Civil Appeal Nos. 7687-7688/2025, 2026 INSC 876 (18 Aug)
Enforcement
IRDAI Penalizes Canara HSBC Life and IndusInd Bank for Conduct Lapses
IRDAI issued orders against Canara HSBC Life Insurance Company and IndusInd Bank, as a corporate agent, in September 2026 for lapses in policyholder protection and conduct. Canara HSBC Life was fined ₹1 crore for mis-selling a deferred annuity policy to an 88-year-old customer, including failures relating to suitability assessment, verification, disclosures and adherence to approved product features. IndusInd Bank was also fined ₹1 crore for failing to maintain an adequate insurance-specific grievance redressal mechanism, while being cautioned over renewal notices, regulatory disclosures and website display requirements.
Read: IRDAI Orders on Canara HSBC Life | IRDAI Orders on IndusInd Bank
IRDAI Penalizes ICICI Lombard for Outsourcing and Governance Lapses
IRDAI, vide order dated September 7, 2026, imposed a ₹1 crore penalty on ICICI Lombard General Insurance Company following an onsite inspection and enforcement proceedings. The violations related to outsourcing of activities, vendor selection and due diligence, record maintenance, internal controls, governance and regulatory compliance, under the IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 and corporate governance guidelines. IRDAI also issued advisories concerning unallocated premium and delays in processing free-look cancellation requests and directed the insurer to place the order before its Board and submit an Action Taken Report.
Read: IRDAI Order on ICICI Lombard’s Outsourcing and Governance Lapses
Beyond India
EIOPA Advises EU on Minimum Common Standards for Insurance Guarantee Schemes
The European Insurance and Occupational Pensions Authority (“EIOPA”), vide advice dated August 31, 2026, has advised the European Commission on establishing minimum common standards for Insurance Guarantee Schemes (“IGS”) across the European Union. The proposals include a targeted IGS covering specified life and non-life insurance policies, activation when an insurer or reinsurer is failing or likely to fail, harmonized timelines for claims submission and payouts, harmonized conditions for the continuation of policies, and liquidity and funding requirements. EIOPA also recommends formal cooperation between national resolution authorities and IGSs to facilitate coordination during resolution and insolvency proceedings.
Read: EIOPA’S advice on minimum common standards for insurance guarantee schemes in the EU
Cyber, Counterparty and Private Credit Risks Remain on EU Watchlist
The Joint Committee of the European Supervisory Authorities (“ESAs”), comprising the EBA, EIOPA and ESMA, issued its Autumn 2026 Update on Risks and Vulnerabilities in the EU Financial System on September 23, 2026. The update highlights vulnerabilities arising from non-EEA dependencies, private credit, cyber risks, artificial intelligence (“AI”) and quantum computing. For insurers, around 13% of investments are linked to non-EEA markets and 28% of ceded risks are transferred to non-EEA counterparties, creating potential concentration and counterparty risks. The ESAs also flag increasing cyber risks from frontier AI and potential future threats to cryptographic systems from quantum computing, and call for enhanced risk monitoring, resilience testing and contingency planning.
Read: ESAs Autumn 2026 Update on EU Financial System Risks
ISDA Desk
ISDA Issues Governance Framework for Standard Initial Margin Model
ISDA, on September 18, 2026, published the ISDA SIMM Governance Framework, establishing governance and review processes for the ISDA Standard Initial Margin Model (“SIMM”). The Framework establishes an ISDA SIMM Governance Committee, comprising the SIMM Governance Forum and Executive Committee, to oversee model modifications, risk-factor additions, methodology changes, calibrations and regulatory engagement. It provides for annual re-calibration and methodology review, supported by independent validation, and requires reporting of material and persistent margin shortfalls or reconciliation issues. SIMM users must monitor portfolio-level risk coverage and remediate material shortfalls through additional margin, add-ons or regulatory standard schedules. Material changes are subject to regulatory notification at least 60 days before implementation.
Read: ISDA SIMM Governance Framework
ISDA Expands Common Domain Model to Cover Umbrella Agreements and Contract Amendments
ISDA in its September 04, 2026 paper, titled “Expanding Legal Agreement Coverage in the CDM: Umbrella Agreements and Contract Amendments” has expanded the Common Domain Model to represent umbrella agreements and contract amendments. The enhancement enables firms to capture multiple legally independent bilateral relationships under a single umbrella agreement and record amendments, restatements and ISDA protocol changes as structured modifications, preserving an auditable amendment history and current “as-amended” state. ISDA notes that this can improve automation across legal, onboarding, collateral, risk, netting, capital and reporting functions while reducing manual reconciliation and operational risk.
Read: ISDA Paper on Umbrella Agreements and Amendments
ISDA Calls for Wider Use of Non-Cash Collateral for Variation Margin
ISDA, in its August 2026 paper “Expanding the Universe of Eligible Variation Margin Collateral for Non-cleared Derivatives,” highlights the growing use of non-cash assets as variation margin (“VM”) for non-cleared OTC derivatives. Citing the 2025 ISDA Margin Survey, the paper notes that non-cash collateral accounted for 32.4% of VM received by 32 reporting dealers in 2025, the highest since the survey began. ISDA identifies operational barriers including inconsistent eligibility definitions, manual substitutions, concentration limits and fragmented settlement systems, and proposes standardized collateral definitions, automation and portfolio-wide optimization. It also highlights triparty arrangements, tokenization, money market funds and US Treasury ETFs as emerging solutions.
Read: ISDA Paper on Eligible Variation Margin Collateral
We will be back next month with another update. Thank you for reading!
DISCLAIMER
The content provided in this newsletter is intended for general awareness and should not be considered as legal advice. Readers are advised to consult with a qualified legal professional regarding any specific issues mentioned herein. If you have any questions about any of these developments or would like to see something different next month, reach out to us at insurance@sarthaklaw.com .