Executive Summary:
This notification amends the Indian Insurance Companies Foreign Investment Rules, 2015. It removes the cap on foreign equity investment for insurance intermediaries, allowing foreign direct investment under the automatic route, subject to certain conditions and verification by the Authority. The rules came into force on September 2, 2019.
Key Points / Main Content:
Foreign Investment in Insurance Intermediaries:
* There is no cap on foreign equity investment for intermediaries or insurance intermediaries.
* Foreign direct investment proposals are allowed under the automatic route, subject to verification by the Authority.
* Foreign investment is governed by the same terms as provided under rules 7 and 8.
Conditions for Intermediaries with Majority Foreign Shareholding:
* Must be incorporated as a limited company under the Companies Act, 2013.
* At least one of the Chairman of the Board, CEO, Principal Officer, or Managing Director must be a resident Indian citizen.
* Must obtain prior permission from the Authority for repatriating dividends.
* Must bring in the latest technological, managerial, and other skills.
* Shall not make payments to the foreign group or promoter or subsidiary or interconnected or associate entities beyond what is necessary or permitted by the Authority
* Must disclose all payments made to its group or promoter or subsidiary or interconnected or associate entities in specified formats.
* Composition of the Board of Directors and key management persons shall be as specified by the concerned regulators.
Other Amendments:
* The definition of "intermediary or insurance intermediary" is inserted, referring to clause f of subsection 1 of section 2 of the Insurance Regulatory and Development Authority Act, 1999.
* In rule 10, the words "intermediary and insurance intermediary" shall be inserted after the words "Indian Insurance Company".
Impact Analysis:
Insurance Intermediaries:
* Impact: Can attract more foreign investment and potentially expand their operations. They must comply with the new conditions for intermediaries with majority foreign shareholding.
* Action Required: Ensure compliance with the conditions, including incorporation as a limited company, having a resident Indian citizen in a key leadership role, and obtaining permission for dividend repatriation.
Insurance Regulatory and Development Authority (The Authority):
* Impact: Responsible for verifying foreign direct investment proposals and setting specifications for disclosures.
* Action Required: Develop verification processes and formats for disclosures related to payments made to group entities.
Foreign Investors:
* Impact: Can now invest in Indian insurance intermediaries without any cap on equity.
* Action Required: Comply with the existing rules 7 and 8, and be prepared for verification by the Authority.
Entities like Banks functioning as Insurance Intermediaries:
* Impact: The foreign equity investment caps applicable in their sector shall continue to apply, subject to the condition that the revenues of such entities from the primary noninsurance related business must remain above 50 per cent. of their total revenues in any financial year.
* Action Required: Ensure compliance with the existing rules.
Key Entities Referenced
Insurance Act, 1938: A foundational law governing the insurance sector in India. This notification references sections within the Act related to foreign investment.
Insurance Regulatory and Development Authority Act, 1999: An Act establishing the Insurance Regulatory and Development Authority (IRDA) in India. This notification refers to the Act in relation to powers conferred to regulate the insurance sector.
Central Government: The executive authority of the Union of India, responsible for formulating and implementing policies, including those related to foreign investment in the insurance sector.
Indian Insurance Companies Foreign Investment Rules, 2015: The principal rules governing foreign investment in Indian insurance companies, which this notification amends.
Indian Insurance Companies Foreign Investment Amendment Rules, 2019: The specific set of rules introduced via this notification, amending the 2015 rules.
Official Gazette: The official government publication where notifications, rules, and regulations are published.
Companies Act, 2013: An act of the Parliament of India that regulates incorporation of a company, responsibilities of a company, directors, dissolution of a company.
New Delhi: The location where the Ministry of Finance issued the notification.
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अअअअििििधधधधससससचचूूचचूू ननननाााा
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1.(1) इन िनयम2 का सिं AB नाम भारतीय बीमा कंपनी (िवदशे ी िविनधान) िनयम, 2019 ह ै।
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4526 GI/2019 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
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जाएगा ।
[फा. सं. 13011/19/2013-बीमा-II]
सुची(cid:15)(cid:16) िमg, संय1ु सिचव
(cid:11)(cid:11)(cid:11)(cid:11)टटटट(cid:13)(cid:13)(cid:13)(cid:13)पपपपणणणण :::: मूल िनयम भारत के राजपD, असाधारण अिधसूचना सं^या सा.का.िन. 115(अ), तारीख 19 फरवरी, 2015 .ारा
-कािशत क गई थी और अिधसूचना सं^या सा.का.िन. 534(अ), तारीख 3 जुलाई, 2015 और
सा.का.िन. 314(अ), तारीख 16 माच,= 2016 .ारा पHाQवतL संशोधन (cid:4)कए गए थ े।
MINISTRY OF FINANCE
(Department of Financial Services)
NOTIFICATION
New Delhi, the 2nd September, 2019
G.S.R. 619(E).—In exercise of the powers conferred by clause (aaa) of sub-section (2) of section 114
of the Insurance Act,1938 (4 of 1938) read with clause (b) of sub-section (7A) of section 2 of the said Act and
section 24 of the Insurance Regulatory and Development Authority Act,1999(41 of 1999), the Central
Government hereby makes the following rules further to amend the Indian Insurance Companies (Foreign
Investment) Rules, 2015, namely:-
1. (1) These rules may be called Indian Insurance Companies (Foreign Investment) Amendment Rules, 2019.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Indian Insurance Companies (Foreign Investment) Rules, 2015,-
(a) in rule 2, after clause (l), the following clause shall be inserted, namely:-
(la)"intermediary or insurance intermediary" shall have the meaning assigned to it in clause (f) of
sub-section (1) of section 2 of the Insurance Regulatory and Development Authority Act, 1999;”;
(b) for rule 9, the following rule shall be substituted, namely:-¹Hkkx IIµ[k.M 3(i)º Hkkjr dk jkti=k % vlk/kj.k 3
“9. (1) There shall be no cap to foreign equity investment for intermediaries or insurance
intermediaries.
(2) The foreign direct investment proposals under this rule shall be allowed under the automatic route
subject to verification by the Authority and the foreign investment in intermediaries or insurance
intermediaries shall be governed by the same terms as provided under rules 7 and 8:
Provided that where an entity like a Bank, whose primary business is outside the insurance area, is
allowed by the Authority to function as an insurance intermediary, the foreign equity investment
caps applicable in that sector shall continue to apply, subject to the condition that the revenues of
such entities from the primary (non-insurance related) business must remain above 50 per cent. of
their total revenues in any financial year.
(3) The insurance intermediary that has majority shareholding of foreign investors shall undertake the
following:
(i) be incorporated as a limited company under the provisions of the Companies Act, 2013;
(ii) at least one from among the Chairman of the Board of Directors or the Chief Executive
Officer or Principal Officer or Managing Director of the insurance intermediary shall be a
resident Indian citizen;
(iii) shall take prior permission of the Authority for repatriating dividend;
(iv) shall bring in the latest technological, managerial and other skills;
(v) shall not make payments to the foreign group or promoter or subsidiary or interconnected
or associate entities beyond what is necessary or permitted by the Authority;
(vi) shall make disclosures in the formats to be specified by the Authority of all payments
made to its group or promoter or subsidiary or interconnected or associate entities;
(vii) composition of the Board of Directors and key management persons shall be as specified
by the concerned regulators;
(c) in rule 10, after the words “Indian Insurance Company,”, the words ‘intermediary and insurance
intermediary’ shall be inserted.
[F. No. 13011/19/2013-Ins. II]
SUCHINDRA MISRA, Jt. Secy.
Note : The principal rules were published in the Gazette of India, Extraordinary, vide notification number
G.S.R. 115(E), dated the 19th February, 2015 and subsequently amended by notifications number
G.S.R. 534(E), dated the 3rd July, 2015 and G.S.R. 314(E), dated the 16th March, 2016.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.