Foreign Direct Investment in the insurance sector has been
permitted up to 49% pursuant to the Insurance Laws (Amendment) Act,
With the amendments to the Indian Insurance Companies (Foreign
Investment) Rules, 2016 and the FDI Policy in March, 2016,
investments up to 49% in the insurance sector are now permitted
through the automatic route i.e. prior approval of the Foreign
Investment Promotion Board is not required for increase in foreign
investment up to 49%. Prior approval of the IRDAI will be required
Set out below are some of the key points for foreign investment
in an Indian insurance company, from an insurance regulatory
1. All investments, including foreign investments, in an Indian
insurance company exceeding 1% of the paid up share capital of the
company require prior approval of the IRDAI. While granting the
approval, it is customary for the IRDAI to impose a lock-in period
on the shares acquired.
2. All foreign investments must comply with applicable IRDAI
regulations which prescribe the manner of computation of foreign
shareholding in insurance companies.
3. There are no separate caps on holding of a single foreign
investor in an Indian insurance company – the 49% limit will
apply to all foreign investment.
4. All Indian insurance companies must be "Indian owned and
controlled", in the manner prescribed in the IRDAI's
Guidelines on Indian Owned and Controlled ("Control
Guidelines"). The rights of non-resident investors often need
to be negotiated in light of the Control Guidelines, and the
IRDAI's norms on corporate governance of insurance companies.
From a regulatory perspective, it is imperative that investments
are structured keeping in mind the foregoing mandates.
5. A foreign investor that has exited from an Indian insurance
company cannot invest in a new insurance joint venture, till the
completion of two financial years from the exit date.
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.
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