MANU/IRDA/0039/2015

Authority : Insurance Regulatory and Development Authority

Notification No. : IRDA/F&A/GDL/GLD/180/10/2015

Date : 19.10.2015

Guidelines on "Indian owned and controlled"

The Insurance Laws (Amendment) Act 2015 introduced some much awaited reforms, including, increasing the foreign investment cap in the insurance sector to 49 percent, permitting overseas reinsurers to open branch offices to carry out reinsurance business in India, etc. The Insurance Laws (Amendment) Act, 2015 also provides for "Indian Owned and controlled" requirement for an Indian Insurance Company.

The Insurance Laws (Amendment) Act, 2015 defines Indian insurance company under Section 2(7A) as under:

"Indian insurance company" means any insurer, being a company which is limited by shares, and, -

(a) Which is formed and registered under the Companies Act, 2013 as a public company or is converted into such a company within one year of the commencement of Insurance Laws (Amendment) Act, 2015;

(b) In which the aggregate holdings of equity shares by foreign investors, including portfolio investors, do not exceed forty-nine per cent of the paid up equity capital of such Indian insurance company, which is Indian owned and controlled, in such manner as may be prescribed.

Explanation - For the purpose of this sub-clause, the expression "control" shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreement or voting agreements;

(c) Whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurance business.

In exercise of the powers conferred by clause (aaa) of sub-section (2) of section 114 of the Insurance Act, 1938 read with clause (b) of sub-section (7A) of section 2 of the Insurance Act, 1938 and section 24 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), the Central Government has notified the Indian Insurance Companies (Foreign Investment) Rules, 2015. These Rules mainly govern Indian control of Indian Insurance Company, Indian ownership and issues relating to foreign investment. The definition of "Indian ownership" has since been amended by Indian Insurance Companies (Foreign Investment) Amendment Rules, 2015.