## Report on the Indian Insurance Companies Foreign Investment Amendment Rules, 2021
**1. Executive Summary:**
This report analyzes the Indian Insurance Companies Foreign Investment Amendment Rules, 2021, as published in the Gazette of India on May 19, 2021. The amendment modifies the Indian Insurance Companies Foreign Investment Rules, 2015, primarily by increasing the permissible foreign investment limit in Indian insurance companies and revising certain definitions and operational requirements. Key changes include raising the foreign investment limit from forty-nine to seventy-four percent, altering definitions of "Resident Indian Citizen" and "Total Foreign Investment," and introducing new requirements regarding the composition of the board of directors, key management personnel, and profit retention for companies with foreign investment exceeding forty-nine percent. This report aims to provide a clear understanding of these amendments and their implications for stakeholders in the Indian insurance sector.
**2. Introduction:**
This report provides an analysis of the Indian Insurance Companies Foreign Investment Amendment Rules, 2021, based solely on the provided policy text. The purpose is to inform stakeholders, particularly those in the insurance industry, about the specific changes introduced by this amendment and their potential impact.
**3. Policy Overview:**
* **Original Policy:** The Indian Insurance Companies Foreign Investment Rules, 2015.
* **Core Objectives (as inferred from the provided text):**
* To regulate and facilitate foreign investment in Indian insurance companies.
* To ensure a degree of Indian control and management within these companies.
* To strengthen the financial stability and corporate governance of insurance companies with foreign investment.
**4. Background and Rationale:**
The amendment likely aims to attract greater foreign investment into the Indian insurance sector. The increase in the foreign investment limit suggests a desire to make the Indian market more attractive to foreign investors. The revised definitions and new requirements relating to board composition and profit retention indicate an intent to balance increased foreign participation with continued Indian oversight and financial prudence within the industry. This could also be an effort to improve the long-term solvency and governance of insurance companies with significant foreign investment.
**5. Key Provisions / Changes:**
The Indian Insurance Companies Foreign Investment Amendment Rules, 2021, introduces the following key changes to the Indian Insurance Companies Foreign Investment Rules, 2015:
* **Amendment to Rule 2 (Definitions):**
* *Specific Change:* Clauses c, e, k, and l of rule 2(1) are omitted. Clause o and p are substituted. A new sub-rule 2 is added to rule 2.
* *New Rule/Provision:*
* **Resident Indian Citizen:** This term will now be defined in accordance with the Central Government's policy on foreign direct investment.
* **Total Foreign Investment:** The calculation method will be specified in regulations made by the Authority regarding the registration of Indian Insurance Companies.
* A new subrule 2 states that any word or expression used in the amendment and not defined in it, but defined in the Act or regulations made under it, will have the same meaning as those acts and regulations.
* *Effect of the Change:* These changes standardize the definitions based on broader government policy and regulatory practices, allowing for greater adaptability and consistency.
* **Amendment to Rule 3 (Foreign Investment Limit):**
* *Specific Change:* The word "fortynine" is substituted with "seventyfour."
* *New Rule/Provision:* The permissible foreign investment limit in Indian insurance companies is increased to 74%.
* *Effect of the Change:* This significantly increases the potential level of foreign ownership in Indian insurance companies, likely to attract more foreign capital.
* **Amendment to Rule 4 (Board Composition & Key Management):**
* *Specific Change:* Rule 4 is entirely substituted.
* *New Rule/Provision:*
* Companies with foreign investment must have a majority of directors and key management personnel (KMP) as Resident Indian Citizens.
* At least one among the chairperson, managing director, and CEO must be a Resident Indian Citizen.
* For companies with foreign investment exceeding 49%, if dividends are paid or the solvency margin is less than 1.2 times the control level, at least 50% of the net profit must be retained in the general reserve.
* For companies with foreign investment exceeding 49%, not less than 50% of its directors shall be independent directors, unless the chairperson is an independent director, in which case at least one-third of its board shall comprise of independent directors.
* *Effect of the Change:* This ensures Indian control in key decision-making roles and introduces measures to safeguard financial stability and corporate governance in companies with substantial foreign ownership.
* **Amendment to Rule 5 (Reinsurance):**
* *Specific Change:* The word "fortynine" is substituted with "seventyfour."
* *New Rule/Provision:* The clause about reinsurance is linked to the 74% foreign investment limit. (The original clause is not given so we cannot know the full impact)
* *Effect of the Change:* This aligns the reinsurance requirements with the increased foreign investment limit.
* **Amendment to Rule 8:**
* *Specific Change:* The letters "FEMA" are replaced with "Foreign Exchange Management Act, 1999 42 of 1999."
* *New Rule/Provision:* Full title of the act is included.
* *Effect of the Change:* This is a clarification, providing the full name and citation of the Foreign Exchange Management Act.
**6. Target Audience and Stakeholders:**
The primary target audience and stakeholders are:
* Indian insurance companies.
* Foreign investors (current and potential) in the Indian insurance sector.
* The Insurance Regulatory and Development Authority of India (IRDAI).
* Key Management Personnel in Indian insurance companies.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency:** The Insurance Regulatory and Development Authority of India (IRDAI) is likely responsible for overseeing the implementation and enforcement of these amendments. The Department of Financial Services, Ministry of Finance, is the issuing body of the notification.
* **Timelines:** Existing Indian Insurance Companies with foreign investment must comply with the requirements of the provisions of subrule 1 within one year from the commencement of the Indian Insurance Companies Foreign Investment Amendment Rules, 2021, meaning before May 19th, 2022.
* **Procedures:** IRDAI will likely issue further guidelines or regulations to clarify the practical implementation of the new definitions, the calculation of total foreign investment, and the compliance requirements for board composition and profit retention.
**8. Expected Outcomes / Impact of Changes:**
The likely intended outcomes of these amendments are:
* Increased foreign investment in the Indian insurance sector due to the higher permissible limit.
* Greater alignment with international best practices in corporate governance.
* Improved financial stability and solvency of insurance companies, particularly those with significant foreign investment.
* Continued Indian oversight and control in key management positions.
**9. Conclusion:**
The Indian Insurance Companies Foreign Investment Amendment Rules, 2021, represents a significant step towards liberalizing the Indian insurance sector and attracting more foreign capital. The increase in the foreign investment limit, coupled with the new governance and financial requirements, seeks to strike a balance between promoting growth and ensuring stability within the industry. Insurance companies and investors must carefully consider these changes and adapt their strategies to ensure compliance and maximize the benefits of the new regulatory environment.
Key Entities Referenced
Ministry of Finance: The Indian government ministry responsible for financial matters.
Department of Financial Services: A department within the Ministry of Finance.
New Delhi: The location of the notification, likely the capital of India.
Indian Insurance Companies Foreign Investment Amendment Rules, 2021: The specific rules being amended.
Gazette of India: The official government gazette of India in which the rules are published.
Central Government: The government of India.
Insurance Act, 1938: The primary legislation governing insurance in India.
Indian Insurance Companies Foreign Investment Rules, 2015: The principal rules being amended by this notification.
Foreign Exchange Management Act, 1999: Referred to as FEMA, the Act regulates foreign exchange in India.
Saurabh Mishra: Jt. Secy. signatory of the notification.
रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99
सी.जी.-डी.एल.-अ.-19052021-227094
xxxGIDHxxx
CG-DL-E-19052021-227094
xxxGIDExxx
असाधारण
EXTRAORDINARY
भाग II—खण्ड 3—उप-खण्ड (i)
PART II—Section 3—Sub-section (i)
प्राजधकार स ेप्रकाजित
PUBLISHED BY AUTHORITY
स.ं 271] नई दिल्ली, बधु िार, मई 19, 2021/िैिाख 29, 1943
No. 271] NEW DELHI, WEDNESDAY, MAY 19, 2021/VAISAKHA 29, 1943
जित्त मत्रं ालय
(जित्तीय सेिाएं जिभाग)
अजधसचू ना
नई दिल्ली, 19 मई, 2021
सा.का.जन. 337(अ).—कजतपय प्रारूप जनयम अर्ाात् भारतीय बीमा कंपनी (जिििे ी जिजनधान) संिोधन जनयम,
2021 में संिोधन करने के जलए प्रारूप जनयम, भारत के रािपत्र, असाधारण, भाग-II, खंड 3, उप-खंड (i) तारीख
15 अप्रैल, 2021 में भारत सरकार, जित्त मंत्रालय (जित्तीय सेिाएं जिभाग) की अजधसूचना सं. सा.का.जन. 266 (अ),
तारीख 13 अप्रैल, 2021 के अधीन उससे प्रभाजित होने िाले संभाजित व्यजियों से उस तारीख से जिसको उनका प्रकािन
दकया िाता ह,ै पन्द्रह दिन के भीतर सुझाि आमंजत्रत करते हुए प्रकाजित दकए गए र्े ;
और उि प्रारूप जनयमों पर प्राप्त सुझािों पर केंरीय सरकार द्वारा जिचार दकया गया र्ा ।
अतः अब केंरीय सरकार, बीमा अजधजनयम, 1938 की धारा 2 के खंड (7क) के उपखंड (ख) के सार्
पठित उि अजधजनयम की धारा 114 की उपधारा (2) के खंड (ककक) द्वारा प्रित्त िजियों का प्रयोग करते हुए
भारतीय बीमा कंपनी (जिििे ी जिजनधान) जनयम, 2015 का और संिोधन करने के जलए जनम्नजलजखत जनयम
बनाती ह,ै अर्ाात्:-
1. (1) इन जनयमों का संजिप्त नाम भारतीय बीमा कंपनी (जिििे ी जिजनधान) (संिोधन) जनयम, 2021 ह ै।
(2) ये रािपत्र में उनके प्रकािन की तारीख को प्रिृत्त होंगे।
2721 GI/2021 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
2. भारतीय बीमा कंपनी (जिििे ी जिजनधान) जनयम, 2015 (जिसे इसमें इसके पश्चात मूल जनयम कहा गया ह)ै में,–
(i) जनयम 2 को उपजनयम (1) के रूप में संखयांदकत दकया िाएगा और इस प्रकार संखयांदकत उपजनयम (1)
में, -
(I) खंड (ग), खंड (ङ), खंड (ट) और खंड (ि) का लोप दकया िाएगा;
(II) खंड (ण) के स्ट्र्ान पर जनम्नजलजखत खंड रखा िाएगा, अर्ाात्:-
‘(ण) “जनिासी भारतीय नागठरक” का िही अर्ा होगा िो उसका जिििे ी प्रत्यि जिजनधान पर सरकार
द्वारा समय-समय पर जिरजचत नीजत में हो;’;
(III) खंड (त) के स्ट्र्ान पर जनम्नजलजखत खंड रखा िाएगा, अर्ाात्:-
‘(त) दकसी भारतीय बीमा कंपनी में “कुल जिििे ी जिजनधान” से ऐसी कंपनी में जिििे ी जिजनधानकतााओं
द्वारा दकए गए प्रत्यि और अप्रत्यि जिििे ी जिजनधान की कुल राजि अजभप्रेत है, जिसकी संगणना
भारतीय बीमा कंपजनयों के रजिस्ट्रीकरण के संबंध में प्राजधकरण द्वारा बनाए गए जिजनयमों में जिजनर्िष्टा
रीजत में की िाएगी;’;
(IV) खंड (र्) का लोप दकया िाएगा;
(ii) जनयम 2 में इस प्रकार संखयांदकत उपजनयम (1) के पश्चात् जनम्नजलजखत उपजनयम अंतःस्ट्र्ाजपत दकया िाएगा,
अर्ाात्:-
“(2) इसमें प्रयुि िब्ि और पि िो इन जनयमों में पठरभाजित नहीं हैं ककंतु अजधजनयम या तद्धीन बनाए गए
जनयमों अर्िा जिजनयमों में पठरभाजित हैं, का क्रमिः िही अर्ा होगा िो उनका अजधजनयम या जनयमों अर्िा
जिजनयमों में ह।ै ”।
3. मूल जनयमों के जनयम 3 में “उनचास” िब्ि के स्ट्र्ान पर “चौहत्तर” िब्ि रखा िाएगा।
4. मूल जनयमों के जनयम 4 के स्ट्र्ान पर जनम्नजलजखत जनयम रखे िाएंगे, अर्ाात्:-
“4. (1) जिििे ी जिजनधान रखने िाली दकसी भारतीय कपनी में,-
(क) उसके जनििे कों का बहुमत,
(ख) उसके प्रमुख प्रबंधकीय कार्माकों का बहुमत, और
(ग) उसके बोडा के अध्यि, उसके प्रबंध जनििे क और उसके मुखय कायापालक अजधकारी में से कम से कम एक व्यजि,
जनिासी भारतीय नागठरक होगा।
स्ट्पष्टीकरण- इस जनयम और जनयम 9 के प्रयोिनों के जलए “प्रमुख प्रबंधकीय व्यजि” का िही अर्ा होगा िो उसका
भारत में बीमाकत्तााओं के जलए कापोरेट िासन प्राजधकारी द्वारा बनाए गए मागाििाक जसद्धांतों में उसका ह ै।
(2) जिििे ी जिजनधान रखने िाली प्रत्येक भारतीय बीमा कंपनी िो भारतीय बीमा कंपनी (जिििे ी जिजनधान)
संिोधन जनयम, 2021 के प्रारंभ को या उसके पूिा अजस्ट्तत्ि में है, ऐसे प्रारंभ होने के एक ििा के भीतर उपजनयम (1) के
उपबंधों की अपेिाओं का अनुपालन करेगी ।
4क. उनचास प्रजतित से अजधक जिििे ी जिजनधान रखने िाली दकसी भारतीय बीमा कंपनी में,-[भाग II—खण् ड 3(i)] भारत का रािपत्र : असाधारण 3
(क) दकसी जित्तीय ििा के जलए जिसमें साम्या िेयरों पर लाभांि संित्त दकया िाता ह ै और जिसके जलए दकसी भी
समय िोधन अिमता मार्िान 1.2 गुना से कम ह,ै िोधन अिमता जनयंत्रण स्ट्तर जित्तीय ििा के िुद्ध लाभ से
पचास प्रजतित से कम नहीं ह,ै को साधारण आरजिती में प्रजतधाठरत दकया िाएगा; और
(ख) उसके जनििे कों के पचास प्रजतित से अन्द्यून स्ट्ितंत्र जनििे क होंगे, िब तक दक उसके बोडा का अध्यि स्ट्ितंत्र
जनििे क न हो, उस ििा में उसका कम से एक-जतहाई बोडा स्ट्ितंत्र जनििे कों से जमलकर बनेगा।”।
5. मूल जनयम में, जनयम 5 में “उनचास” िब्ि के स्ट्र्ान पर “चौहत्तर” िब्ि रखा िाएगा।
6. मूल जनयम में, जनयम 8 में “एफईएमए” अिरों के स्ट्र्ान पर “जिििे ी जिजनमय प्रबंधन अजधजनयम, 1999 (1999 का
42)” िब्ि, अंक और कोष्ठक रखे िाएंगे ।
[फा.सं. 13011/19/2013-बीमा-II]
सौरभ जमश्रा, संयुि सजचि
ठटप्पणीः मूल जनयम भारत के रािपत्र, असाधारण, भाग-II, खण्ड-3, उप-खण्ड (i) में अजधसूचना संखया
सा.का.जन. 115 (अ), तारीख 19 फरिरी, 2015 द्वारा प्रकाजित दकए गए र्े और पश्चातिती संिोधन अजधसूचना संखया
सा.का.जन. 534 (अ), तारीख 03 िुलाई, 2015, सा.का.जन. 314 (अ.), तारीख 16 माचा, 2016 और स.का.जन. 619(अ),
तारीख 2 जसतम्बर, 2019 द्वारा दकए गए र्े ।
MINISTRY OF FINANCE
(Department of Financial Services)
NOTIFICATION
New Delhi, the 19th May, 2021
G.S.R. 337(E).—Whereas, certain draft rules, namely, the Indian Insurance Companies (Foreign
Investment) Amendment Rules, 2021, were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-
section (i), dated 15th April, 2021 under the notification of the Government of India in the Ministry of Finance
(Department of Financial Services) number G.S.R. 266 (E), dated the 13th April, 2021, inviting suggestions from
persons likely to be affected thereby within a period of fifteen days from the date on which they are published;
And whereas suggestions received on the said draft rules were considered by the Central Government.
Now, therefore, in exercise of the powers conferred by clause (aaa) of sub-section (2) of section 114 of the
Insurance Act, 1938, read with sub-clause (b) of clause (7A) of section 2 of the said Act, 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 the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2021.
(2) They shall come into force from the date of their publication in the Official Gazette.
2. In the Indian Insurance Companies (Foreign Investment) Rules, 2015 (hereinafter referred to as the principal
rules),—
(i) rule 2 shall be numbered as sub-rule (1) thereof, and in sub-rule (1) as so numbered,—
(I) clauses (c), (e), (k) and (l) shall be omitted;
(II) for clause (o), the following clause shall be substituted, namely:—
‘(o) “Resident Indian Citizen” shall have the meaning assigned to it in such policy as the
Central Government may frame from time to time on foreign direct investment;’;
(III) for clause (p), the following clause shall be substituted, namely:—4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
‘(p) “Total Foreign Investment” in an Indian Insurance Company, shall mean the sum total of
direct and indirect foreign investment by Foreign Investors in such company, calculated in
such manner as is specified in regulations made by the Authority with regard to
registration of Indian Insurance Companies;’;
(IV) clause (q) shall be omitted;
(ii) in rule 2, after the sub-rule (1) as so numbered, the following sub-rule shall be inserted, namely:—
“(2) Words and expressions used herein and not defined in these rules, but defined in the Act or in the
rules or regulations made thereunder, shall have the same meanings respectively assigned to them in the
Act or in the rules or regulations.”.
3. In the principal rules, in rule 3, for the word “forty-nine”, the word “seventy-four” shall be substituted.
4. In the principal rules, for rule 4, the following rules shall be substituted, namely:—
“4. (1) In an Indian Insurance Company having foreign investment,—
(a) a majority of its directors,
(b) a majority of its Key Management Persons, and
(c) at least one among the chairperson of its Board, its managing director and its Chief Executive
Officer,
shall be Resident Indian Citizens.
Explanation.—For the purposes of this rule and rule 9, the expression “Key Management Person” shall have
the same meaning as assigned to it in guidelines made by the Authority on corporate governance for insurers in
India.
(2) Every Indian Insurance Company having foreign investment, existing on or before the date of
commencement of the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2021, shall
within one year from such commencement, comply with the requirements of the provisions of sub-rule (1).
4A. In an Indian Insurance Company having foreign investment exceeding forty-nine per cent.,—
(a) for a financial year for which dividend is paid on equity shares and for which at any time the
solvency margin is less than 1.2 times the control level of solvency, not less than fifty per cent. of
the net profit for the financial year shall be retained in general reserve; and
(b) not less than fifty per cent. of its directors shall be independent directors, unless the chairperson of
its Board is an independent director, in which case at least one-third of its Board shall comprise of
independent directors.”.
5. In the principal rules, in rule 5, for the word “forty-nine”, the word “seventy-four” shall be substituted.
6. In the principal rules, in rule 8, for the letters “FEMA”, the words, figures and brackets “Foreign Exchange
Management Act, 1999 (42 of 1999)” shall be substituted.
[F. No. 13011/19/2013-Ins.II]
SAURABH MISHRA, Jt. Secy.
Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i),
vide notification number G.S.R. 115 (E), dated the 19th February, 2015 and were subsequently amended by
notification numbers G.S.R. 534(E), dated the 3rd July, 2015, G.S.R. 314(E), dated the 16th March, 2016 and G.S.R.
619(E), dated the 2nd September, 2019.
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.