The long awaited Insurance Laws (Amendment) Bill (the Bill) will
finally become a law in India as it has been passed by the
Parliament of India. The Bill will replace the Insurance Law
(Amendment) Ordinance, 2014, which was promulgated by the President
of India on December 26, 2014 after the Bill could not be passed in
the previous session of the Parliament. The Bill amends three Acts,
namely: the Insurance Act, 1938; the General Insurance Business
(Nationalisation) Act, 1972; and the Insurance Regulatory and
Development Authority Act, 1999.
Increase in foreign equity cap to 49%
The Bill increases the maximum permitted limit of foreign equity
in Indian insurance companies from 26% to 49%. The limit shall be a
composite cap – either as a direct investment or by a
portfolio, or a combination of both. The management and control of
the insurance companies shall remain with Indian companies. The
term "control" has been defined to mean "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 agreements or voting
Lloyd's of London to be treated as a foreign
To facilitate the entry of Lloyd's of London covered under
the Lloyd's Act 1871 of the United Kingdom, the Bill amends the
definition of "foreign company" which would now include a
company or body established under a law of any country outside
India and includes Lloyd's of London established under the
Lloyd's Act 1871 or any of its members.
Registration requirements for doing Insurance business
Every insurer is required to be registered in order to carry on
insurance business in India. Under the Bill, public companies,
co-operative societies, foreign companies operating through a
branch and statutory bodies established by acts of Parliament have
to be registered to carry on insurance. In order to be registered,
each category of insurer requires a minimum amount of capital: for
life insurance, general insurance and health insurance, the minimum
paid up capital required is Rs 1 billion (around USD 16 million)
and for reinsurance business, the minimum paid up capital required
is Rs 2 billion (around USD 32 million). Such paid-up equity
capital would not include the preliminary expenses incurred for
formation and registration of the (re)insurance company.
Branches for reinsurance business in India
The Bill permits foreign reinsurers to open branches only for
reinsurance business in India. The provisions prohibiting an
insurer to invest directly or indirectly outside India the funds of
policyholder would apply to such branches.
With the approval of the Parliament, the Bill shall be now
submitted to the President for his assent on receipt of which it
will be notified and effective as a law.
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