India – Amendments To the Indian Insurance Companies (Foreign Investment) Rules, 2015.
Legal News & Analysis – Asia Pacific - India - Insurance & Reinsurance
22 October, 2019
The Department of Financial Services, Ministry of Finance, Government of India by way of a notification dated September 2, 2019 has amended the Indian Insurance Companies (Foreign Investment) Rules, 2015, pursuant to which the 49% foreign equity investment cap applicable to insurance intermediaries has been removed. Accordingly, 100% foreign equity investment is now permitted under the automatic route, subject to verification by the Insurance Regulatory & Development Authority of India (‘IRDAI’).
However, in case of entities whose primary business is outside the insurance area and is allowed by IRDAI to function as insurance intermediaries, the foreign equity investment caps applicable to the sector in which such entities operates will continue to apply, subject to the condition that the revenues of such entities from the primary (non-insurance related) business must remain above 50% of their total revenues in any financial year.
The Government will now have to issue corresponding notifications under the applicable foreign exchange laws to operationalize these amendments. Amendments will also be required to the Guidelines dated November 20, 2015 by IRDAI on ‘Indian Owned and Controlled’, as applicable to insurance intermediaries.
Further, an insurance intermediary having majority shareholding by foreign investors are inter alia required to comply with the following:
i. it should be incorporated as a limited company under the provisions of the Companies Act;
ii. at least one from among the Chairman of the board of directors, chief executive officer, principal officer or managing director of the insurance intermediary is required to be a resident Indian citizen;
iii. repatriation of dividend will require prior approval of IRDAI;
iv. payments to foreign group or promoter or subsidiary or interconnected or associate entities are not permitted beyond what is necessary or permitted by IRDAI; and
v. composition of the board of directors and key management persons will be as specified by the concerned regulators.
For further information, please contact:
Zia Mody, Partner, AZB & Partners