India: IRDAI (Registration of Indian Insurance Companies) Regulations Amendments: Much Awaited Clarification on Calculation of Foreign Investment

Last Updated: 7 April 2016
Article by Celia Jenkins

The Indian insurance sector has witnessed various reforms since the notification of the Insurance Laws (Amendment) Act 2015 (Amendment Act). The latest addition to the long list of regulatory changes that have been introduced post the Amendment Act is the IRDAI (Registration of Indian Insurance Companies) (Seventh Amendment) Regulations 2016 (Registration Amendment Regulations). Although the Registration Amendment Regulations were notified on 22nd February 2016 (and have come into force on 22nd March 2016), they were released on the official website of the Insurance Regulatory and Development Authority of India (IRDAI) only on 1st April 2016.

The Registration Amendment Regulations have introduced a number of key changes to the existing IRDA (Registration of Indian Insurance Companies) Regulations 2000 (Registration Regulations). The primary amendments introduced by the Registration Amendment Regulations include the following:

  • An applicant whose IRDAI/R1 has been rejected by the IRDAI will now be able appeal to the Securities Appellate Tribunal.
  • A requisition for registration application may now be made for the Life insurance business; General insurance business; Health insurance business (exclusively); or Reinsurance business.
  • An applicant whose requisition has been accepted may make an application in Form IRDAI/R2 for grant of certificate of registration. In cases where the foreign direct investment in the applicant entity is more than 26%, the Form IRDAI/R2 is required to be accompanied by, inter alia, a certified copy of the approval given by the Foreign Investment Promotion Board (FIPB) in accordance with the Indian Insurance Companies (Foreign Investment) Rules 2015.
  • The manner of calculation of equity capital held by foreign investors prescribed by R11 of the Registration Regulations has been amended to state that the calculation of the holding of equity shares by one or more foreign investors in an applicant company, shall be the aggregate of:

    • The quantum of paid up equity share capital held by the foreign investors including foreign venture capital investors, in the applicant company; and
    • The proportion of the paid up equity share capital held or controlled by such foreign investor(s) either by itself or through its subsidiary companies in the Indian promoter(s) or Indian investor(s) as mentioned above.

Provided that this shall not be applicable to an Indian promoter or Indian investors which is a banking company or a public financial institution.

  • Every Insurer being an Indian insurance company and who has already been granted certificate of registration for carrying on insurance business in India must ensure compliance with norms pertaining to "Indian owned and controlled" as specified in §2(7A) of the Insurance Act 1938, within such period as may be specified by the IRDAI.
  • New formats for Form IRDAI/R1 and IRDAI/R2 have now been introduced.

Although all the changes introduced by the Registration Amendment Regulations will have an impact on any entity proposing to operate as an Insurer in India, the amendments made to R11 will, in all probability, have the most lasting impact. It is interesting to note that even prior to the amendments, the approach of the regulator in calculating the foreign investment in an Indian Insurance Company was to not include any foreign investment in the Indian promoter of an Indian insurance company, in the event that such foreign investment was not made by any entity that was a shareholder of the Indian Insurance Company.

If the followed approach was now varied, it would result in the existing structures of some of the major Indian Insurance Companies coming under scrutiny. However, R11 has been amended to provide that the total foreign investment in an Indian Insurance Company will be the sum total of the quantum of paid up equity share capital held by the foreign investors (including foreign venture capital investors), in the applicant company and the proportion of the paid up equity share capital held or controlled by such foreign investor(s) either by itself or through its subsidiary companies in the Indian promoter(s) or Indian investor(s) of the applicant entity.

From a plain reading of the amended R11 it appears that the IRDAI has adopted the approach that only if the foreign investor which is a shareholder of the Indian insurance company is also a shareholder of the Indian promoter(s) or Indian investor(s) of such applicant entity, will the shareholding of the foreign investor in the Indian promoter(s) or Indian investor(s) be taken into consideration for calculating the total foreign investment in the Indian Insurance Company. This amendment will undoubtedly be welcomed by the Indian insurance industry.

The Registration Amendment Regulations have also introduced the requirement of providing a copy of the FIPB approval if the quantum of foreign investment in the applicant entity is more than 26%. However, post notification of the Registration Amendment Regulations the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion has amended the Consolidated FDI Policy 2015, pursuant to which foreign investment in Indian Insurance Companies and insurance intermediaries upto 49% has been brought under the automatic route. In view of these changes, it is anticipated that the Registration Amendment Regulations to be amended further in order to bring them in conformity with the Consolidated FDI Policy 2015.

From the amendments notified, it appears that the feedback received from stakeholders has been taken into account while carrying out the amendments to the Registration Regulations. The amendments on significant points are welcomed clarifications and will definitely go far in encouraging investment in the Indian insurance sector and promoting the growth and expansion of the sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Celia Jenkins
Similar Articles
Relevancy Powered by MondaqAI
Phoenix Legal
Phoenix Legal
Shardul Amarchand Mangaldas & Co
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Phoenix Legal
Phoenix Legal
Shardul Amarchand Mangaldas & Co
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions