The government has amended the Consolidated FDI Policy of 2017 with respect to the Insurance Sector to allow 100% FDI under the automatic route in Intermediaries or Insurance Intermediaries, including insurance brokers, re-insurance brokers, insurance consultants, corporate agents, third party administrators, surveyors and loss assessors and such other entities as may be notified by the IRDA from time to time.

The foreign investment cap of 100 percent will apply on the same terms as applicable to an insurance company, except that the condition of ‘Indian owned and controlled’ will not apply to such intermediaries and the composition of the Board of Directors and key management persons will be as specified by the concerned regulators from time to time.

Foreign investment in intermediaries and insurance intermediaries shall be governed by the same terms as provided under rules 7 and 8 of the Indian Insurance Companies (Foreign Investment) Rules, 2015, i.e. foreign portfolio investment will be governed by provisions of sub-regulations (2), (2A), (3) and (8) of Regulation 5 of FEMA regulations and any increase in foreign investment will be in accordance with pricing guidelines specified by RBI in FEMA regulations, respectively.

The insurance intermediary that has majority shareholding of foreign investors is required to undertake as follows:

• it shall be incorporated as a limited company under the Companies Act 2013
• at least one from among the Chairman of the Board of Directors or CEO or Principal Officer or MD of the intermediary shall be a resident Indian citizen
• it shall take prior permission of the IRDA for repatriating dividend
• it shall bring in the latest technological, managerial and other skills
• it 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
• it shall make disclosures of all payments made to its group or promoter or subsidiary or interconnected or associate entities
• The composition of its board of directors and key management persons shall be as specified by the concerned regulators.

The above amendment will come into effect from the date of FEMA notification.

To refer to Press Note 1 of 2020 dated 21 February 2020, click here

Disclaimer

This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.