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10 December 2019
The Insurance Regulatory Development Authority of India (IRDAI) recently notified the Indian Insurance Companies (Foreign Investment) Amendment Rules 2019 (amendment rules), effectively increasing the limit on foreign direct investment (FDI) in insurance intermediaries to 100% (for further details please see "100% FDI in insurance intermediaries: a welcome change").
Pursuant to the amendment rules, the IRDAI has now notified:
The amendment regulations amend the following regulations that govern insurance intermediaries:
In addition to the conditions stipulated under the amendment rules, the amendment regulations have introduced additional conditions with which insurance intermediaries that have a majority shareholding of foreign investors must comply, including:
Insurance intermediaries that have a majority shareholding of foreign investors must submit an undertaking to the IRDAI, stipulating compliance with the above conditions in the prescribed format. The amendment regulations also omit the Indian owned and controlled requirement, which was stipulated under the IRDAI (Insurance Brokers) Regulations 2018 and the IRDAI (Insurance Web Aggregators) Regulations 2017.
Pursuant to the notification of the amendment rules, there was a lack of clarity regarding the applicability of the "Guidelines on Indian Owned and Controlled" of 19 October 2015 (IOC Guidelines) to insurance intermediaries (for further details please see "100% FDI in insurance intermediaries: a welcome change").
The IRDAI has now notified the IOC Circular, pursuant to which Paragraph 6 of the IOC Guidelines – which extended the applicability of the IOC Guidelines to insurance intermediaries – has been deleted.(1) In addition, the IRDAI Circular on the "Guidelines on Indian Owned and Controlled for Insurance Intermediaries" of 20 November 2015 – which stipulated the undertakings required to be submitted by insurance intermediaries confirming compliance with the Indian owned and controlled requirement – has been withdrawn.
The amendment regulations and the IOC Circular have brought much-needed clarity with respect to the practical concerns surrounding Indian owned and controlled requirements pursuant to the notification of 100% FDI in insurance intermediaries. However, the insurance industry's reaction remains to be seen with regard to the additional conditions stipulated under the amendment rules and the amendment regulations, particularly with respect to the conditions stipulating that the majority of key managerial persons and directors of an insurance intermediary that has a majority shareholding of foreign investors must be resident Indian citizens.
For further information on this topic please contact Shubhangi Pathak or Nimisha Srivastava at Tuli & Co by telephone (+91 11 2464 0906) or email (firstname.lastname@example.org or email@example.com). The Tuli & Co website can be accessed at www.tuli.co.in.
Insurance Intermediaries: These guidelines are also applicable to Insurance Intermediaries as defined in the IRDA Act, 1999 such as Brokers, Third Party Administrators, Surveyors and Loss Assessors etc. However, in case of an insurance intermediary having more than 50 percent of its revenue from the non-insurance activities, these guidelines shall not be applicable to such insurance intermediaries.
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