The Insurance Regulatory and Development Authority (hereinafter
referred to as 'IRDA') has through its guidelines dated
October 19th, 2015, Reference No. IRDA/F&A/GDL/GLD/180/10/2015
(hereinafter referred to as 'guidelines') provided clarity
on the term 'Indian owned and controlled' as used under the
definition of 'Indian Insurance Company' in Section 2(7A)
of The Insurance Laws (Amendment) Act, 2015.
In terms of the Consolidated Foreign Direct Investment Policy
2015, an 'Indian insurance company' shall ensure that its
ownership and control remains at all times in the hands of resident
In order to be treated as an 'Indian Insurance Company',
it is mandatorily required that (i) such Indian Insurance Company
must be registered as a public company under the Companies Act,
2013; (ii) the foreign shareholding in such Indian Insurance
Company should not exceed 49% of the total paid up equity capital;
and (ii) such Indian Insurance Company should be 'Indian owned
and controlled', in such manner as may be prescribed. In order
to provide the clarity on 'Indian owned and controlled',
IRDA has mentioned in the said Guidelines that:
'Control' may be exercised in any one or more of the
following criteria that includes:
virtue of shareholding; or
management rights; or
shareholder's agreements; or
voting agreements; or
any other manner as per applicable laws.
Further, Indian Insurance Company is required to ensure
Majority of its directors excluding independent
directors are nominated by the Indian promoter(s) / Indian
investor(s) and such board is further required to ensure control
over significant policies of the insurance company.
Appointment of key management personnel including CEO,
MD, and Principal Officer are done through the board of directors
(BOD) or by Indian promoter(s) / Indian investor(s). However, key
management person excluding CEO may be nominated by foreign
investor provided such appointment is approved by BOD where
majority of directors excluding independent director are nominees
of Indian promoter(s) / Indian investor(s).
The Chairman of the Board who has a casting vote is
nominated by the Indian promoter(s) / Indian investor(s).
Quorum includes the presence of majority of the Indian
directors irrespective of whether the foreign investor's
nominee is present or not. The right of a foreign investor's
nominee to constitute a valid quorum for meetings is only a
protective right and to that extent would not amount to control as
long as the presence of nominees of Indian Promoter (s) / Investor
(s) are also mandatorily taken into account for the purposes of
Further, in relation to the aforesaid compliances pertaining to
'Indian owned and controlled', all existing Indian
insurance companies are required to file an 'undertaking'
duly signed by the CEO and COO along with required documents,
within a period of 3 (three) months from the date of issue of the
The aforesaid guidelines 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% of its revenue from the
non-insurance activities, the aforesaid guidelines shall not be
applicable to such 'Insurance intermediary'.
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