Total foreign investment, both direct and indirect, in Indian insurance companies cannot exceed the limit of 49 per cent, regulator IRDAI said today.
The regulator issued guidelines to bring in more clarity on the issue of compliance with the manner of Indian-owned and-controlled companies.
“Total foreign investment: Both direct and indirect holding in an Indian insurance company shall not exceed 49 per cent,” it said.
As per the Insurance Laws (Amendment) Act 2015, the foreign investment cap in the insurance sector has been increased to 49 per cent, as well as permitting overseas reinsurers to open branch offices to carry out reinsurance business in India.
The law also provides for “Indian Owned and controlled requirement” for an Indian insurance company.
The Insurance Regulatory and Development Authority of India (Irdai) said the applicablity of these guidelines may come into existence after notification of the Act.
Also, the law will be applicable in case the companies propose to hike their foreign investment from the existing level; or even when they do not intend to increase their current foreign stake from the existing level, Irdai clarified.
About the Indian control, it said the domestic firm shall ensure that majority of the directors, excluding independent directors, should be nominated by Indian promoter/investors; and appointment of key management person, including Chief Executive Officer or Managing Director or Principal officer, should be through the Board of Directors or by the Indian promoter.
However, key management person, excluding CEO, may be nominated by the foreign investor provided that the appointment of such key management person is approved by the Board of Directors, wherein majority of the directors excluding independent directors are the nominees of Indian promotor, it added.
Further, it said that the control can be exercised by any one or more of criterion like by virtue of shareholding; management rights; shareholders agreements; voting agreements; any other manner as per the applicable laws.
Irdai said the guideliens are also applicable to insurance intermediaries such as brokers, third party administrators, surveyors and loss assessors.
“However, in case of an insurance intermediary having more than 50 per cent of its revenue from the non-insurance activities, these guidelines shall not be applicable to such insurance intermediaries.”
The regulator said these guidelines shall come into force from the date of issue.