**Executive Summary**
This document is a notification from the Ministry of Finance, Department of Financial Services, amending the Indian Insurance Companies (Foreign Investment) Rules, 2015. It pertains to foreign equity investment in insurance intermediaries and removes the cap on such investment. The rules were published on September 2nd, 2019, and are effective from the date of their publication in the Official Gazette.
**Key Points / Main Content**
* **Amendment Title and Effective Date:** The rules are called the "Indian Insurance Companies (Foreign Investment) Amendment Rules, 2019" and are effective from the date of publication in the Official Gazette.
* **Definition of Intermediary:** Defines "intermediary or insurance intermediary" as per the Insurance Regulatory and Development Authority Act, 1999.
* **Foreign Equity Investment in Intermediaries:**
* Removes the 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, and are governed by the same terms as rules 7 and 8.
* If an entity like a bank whose primary business is outside insurance, the foreign equity investment caps applicable to 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.
* **Requirements for Insurance Intermediaries with Majority Foreign Shareholding:**
* Must be incorporated as a limited company under the Companies Act, 2013.
* At least one of the Chairman, Chief Executive Officer, 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, promoter, subsidiary, or interconnected or associate entities in formats specified by the Authority.
* The composition of the Board of Directors and key management personnel shall be as specified by the concerned regulators.
* **Amendment to Rule 10:** Inserts the words "intermediary and insurance intermediary" after the words "Indian Insurance Company" in rule 10.
**Impact Analysis**
**Insurance Intermediaries/Insurance Companies**
* **Impact:** Will be governed by the amended rules regarding foreign investment, which removes the cap on foreign equity investment. Those with majority foreign shareholding must adhere to the specified requirements (incorporation, resident Indian citizen in leadership, repatriating dividend permission, technology import, restricted payments, disclosure of payments, and specified board structure).
* **Action Required:** Review current foreign investment structures and ensure compliance with the new rules and requirements, particularly those related to governance and disclosures.
**Foreign Investors**
* **Impact:** Can now invest in Indian insurance intermediaries without any cap on equity holding, but must ensure the intermediaries comply with the additional regulations.
* **Action Required:** Re-evaluate investment strategies in the Indian insurance intermediary sector and ensure compliance with the conditions attached to foreign equity investment.
**Insurance Regulatory and Development Authority (IRDA)**
* **Impact:** Has the responsibility to verify foreign direct investment proposals and specify formats for disclosures related to payments to foreign entities.
* **Action Required:** Develop and implement verification processes for foreign direct investment proposals, create disclosure formats, and specify regulations related to the Board of Directors and key management personnel of insurance intermediaries.
Key Entities Referenced
Insurance Regulatory and Development Authority Act, 1999: Act that defines the term 'intermediary or insurance intermediary'.
Indian Insurance Companies (Foreign Investment) Rules, 2015: The principal rules being amended concerning foreign investment in Indian Insurance Companies.
Insurance Act, 1938: Referenced act providing authority for the rules being amended.
Indian Insurance Companies (Foreign Investment) Amendment Rules, 2019: The policy discussed, amending the 2015 rules on foreign investment.
Ministry of Finance: Government body issuing the notification.
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4526 GI/2019 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
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[फा. सं. 13011/19/2013-बीमा-II]
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-कािशत क गई थी और अिधसूचना सं^या सा.का.िन. 534(अ), तारीख 3 जुलाई, 2015 और
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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.