India - IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2019.
Legal News & Analysis – Asia Pacific - India - Insurance & Reinsurance
20 January, 2020
The Department of Financial Services has, by way of a notification dated September 2, 2019, issued certain amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015, permitting 100% foreign investment under the automatic route in insurance intermediaries (such as third party administrators, web aggregators, insurance brokers, etc.), subject to verification by the Insurance Regulatory and Development Authority of India (‘IIRRDAII’) and compliance with pricing guidelines prescribed by RBI. On October 30, 2019, the IRDAI amended various regulations applicable to insurance intermediaries by notifying the IRDAI (Insurance Intermediaries) (Amendment) Regulations, 2019 (‘Intermediaries Amendment Regulations’) to inter-alia introduce the requirement of an undertaking to be furnished by intermediaries incorporated as a company under the Companies Act and where a majority of the shareholding is held by foreign shareholders, to the effect that:
i. the chairman of the board or the managing director/ chief executive officer/ principal officer of the insurance intermediary is a resident Indian citizen;
ii. the insurance intermediary must take prior permission of the IRDAI for repatriating dividend;
iii. the insurance intermediary will not make payments (other than dividend) to related parties, taken in the aggregate, beyond 10% of the total expenses in a given financial year; and
iv. a majority of directors and key management persons will be resident Indian citizens.
In view of the above, IRDAI issued an additional circular on November 19, 2019 whereby the guidelines dated November 20, 2015 on ‘Indian owned and controlled’ for insurance intermediaries have been withdrawn. Notifications under exchange control regulations to operationalize 100% foreign equity investment in insurance intermediaries are yet to be notified.
For further information, please contact:
Zia Mody, Partner, AZB & Partners