India: Insurance Newsletter – June 2015



The Insurance Regulatory and Development Authority of India ("IRDAI") has, by way of a circular dated 18 May, 2015, issued the IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015 ("Transfer Regulations") to govern the transfer of equity shares of insurance companies and prescribe conditions where such transfer would require prior approval of the IRDAI.

Key provisions of the Transfer Regulations are set out below.

  1. Meaning of 'transfer of shares': It includes transfer of shares from an existing shareholder to another person and also a fresh issue of equity shares that changes the 'shareholding pattern'1 of an insurance company.
  2. Prior approval: The IRDAI's prior approval is required for registration of transfer of shares where:

    1. the transfer results in the total paid up holding of the transferee in the shares of the insurance company to exceed 5% of its paid up capital; and
    2. the nominal value of the shares intended to be transferred by any individual, firm, group, constituents of a group, or body corporate under the same management, jointly or severally will exceed 1% of the paid up equity capital of the insurance company.
  3. Conditions for approval: While providing approval to 'Indian promoters'2 and 'foreign investors'3 to hold shares in an insurance company, the IRDAI may prescribe conditions such as:

    1. a minimum lock-in period; and
    2. infusion of additional capital (in proportion of its shareholding or otherwise at periodic intervals) to ensure compliance with solvency requirements.

    Under the erstwhile regulatory framework, the IRDAI had, by way of a circular clarified that it may impose conditions in relation to minimum lock-in and requirement to infuse additional capital to meet solvency requirements on a proposed transferee or shareholder. This has now been incorporated under the Transfer Regulations.

    While the Transfer Regulations do not clarify/indicate the minimum lock-in period, a cue may be taken from the earlier regime where a minimum lock-in of 5 (five) years was imposed on "promoters". For investors other than promoters, the IRDAI did not fix a minimum lock-in period.
  4. Limit on holdings of 'Indian investors': No 'investor'4 (excluding the foreign investors) is permitted to singly hold shares in an insurance company exceeding 10% of the paid up equity share capital of such insurance company. Further, all 'investors' together (excluding the foreign investors) are not permitted to jointly hold more than 25% of paid up equity share capital of such insurance company.


Pursuant to the promulgation of Insurance Amendment Act, the IRDAI had issued an Exposure Draft on Regulations for Registration and Operations of Branch Offices of Foreign Reinsurers (excluding Lloyd's) on 7 April, 2015 seeking comments from the stakeholders by 30 April, 2015. Based on the feedback received, the IRDAI has, by way of a circular dated 27 May, 2015, issued a second Exposure Draft on Regulations for Foreign Reinsurers ("Second Draft Regulations") inviting comments from stakeholders by 3 June, 2015.

The key changes proposed in the Second Draft Regulations are set out below.

  1. The requirement for an applicant to infuse a minimum assigned capital into the branch office has been increased from INR 500 mn to INR 1 bn.
  2. The requirement for an applicant to have a minimum credit rating has been changed from "BBB" of Standard & Poor to "stable outlook" from any of the internationally renowned credit rating agency.
  3. Annual fee has been changed to 1/20th of 1% of the total premium in respect of facultative reinsurance accepted in India during the financial year preceding the year in which the annual fees is required to be paid subject to a minimum of INR 500,000 and maximum of INR 100 mn.
  4. The branch office of the foreign reinsurer will be permitted to open offices in different parts of the country with the prior approval of the IRDAI.
  5. The branch office of foreign reinsurer will be required to retain the core activities such as underwriting, claims settlement and regulatory compliances. Such branch office may, however, outsource functions such as back-office servicing, investment, information technology, accounts, marketing, human resources, administration and publicity. Outsourcing of any other function(s) will require the prior approval of the IRDAI.
  6. An applicant will make a requisition for registration application for reinsurance business in any one of the following: Category I - those with the order of preference of cessions at par with the Indian reinsurer(s) and Category II - others.
  7. Every Indian insurer, in order of preference, will be permitted to offer for participation in its facultative and treaty surpluses to the following: (a) the Indian reinsurer or those who are granted certificate of registration in Category I or other Indian insurers; (b) those who are granted certificate of registration in Category II, only after having offered to all entities in (a); (c) the offices of insurers set-up in Special Economic Zone, only after having offered to all entities in (a) and (b); and (d) the balance may then be offered to overseas reinsurers.


The IRDAI has, by way of a circular dated 11 May, 2015 issued an Exposure Draft of IRDAI (Registration of Indian Insurance Companies) (Seventh Amendment) Regulations, 2015 ("Draft Amendment Regulations"), inviting comments from interested stakeholders by 8 June, 2015.

Key provisions of the Draft Amendment Regulations are set out below.

  1. Health insurance and reinsurance will be recognised as separate classes of business for requisition of registration application (in accordance with the Insurance Amendment Act).
  2. Every insurer will be required to comply with the provision of "Indian owned and controlled5" as specified in the Insurance Amendment Act6. Existing insurers will also be required to comply with "Indian owned and controlled" requirement within 6 months from the date of the notification of Draft Amendment Regulations. This time period may be extended by the IRDAI on an application made to it subject to maximum period of 1 year from the date of notification of the Draft Amendment Regulations.
  3. An applicant aggrieved by the IRDA's decision can appeal to the SAT within 30 days.
  4. The annual fee for applicants will be 1/20th of 1% of total gross premium written direct by an insurer in India during the financial year preceding the year in which the annual fee is required to be paid subject to minimum of INR 500,000 and maximum of INR 100 mn.


SBI Life Insurance Company Limited ("SBI Life") has recently appealed to the Securities Appellate Tribunal ("SAT") against an order of the IRDAI directing refund of INR 2.75 bn to its policyholders. Notably, the appeal has been filed against an order passed in May, 2014 when there was no provision for appeals to the SAT against orders of the IRDAI.

Subsequently, with the passing of the Insurance Laws (Amendment) Act, 2015, ("Insurance Amendment Act") the law has been amended to empower SAT7 to hear appeals against the orders passed by the IRDAI. News reports suggest that the SAT has accordingly admitted the petition/appeal8. This is likely to stir other insurers to appeal against IRDAI's orders to avoid payments of any penalties imposed.

Given that the SAT has admitted the appeal, its decision in the matter will be binding on both the IRDAI and SBI Life unless either of IRDAI or SBI Life appeals to the Supreme Court.


1 'Shareholding pattern' means the shareholding pattern which was approved by the IRDAI at the time of grant of certificate of registration or at any subsequent time.

2 'Indian promoter' includes: (i) a company formed under the Companies Act, 1956 (which is not a subsidiary as defined in such Act); (ii) a banking company as defined under the Insurance Act, 1938 not including a foreign bank or branch thereof functioning in India; (iii) a public financial institution as defined in the Companies Act, 1956; and (v) a person, who is an Indian citizen or a combination of persons who are Indian citizens.

3 'Foreign investors' means all eligible non-resident entities or persons resident outside India investing in the equity share of an Indian insurance company, as permitted to do so through the Foreign Direct Investment and Foreign Portfolio Investment windows under Foreign Exchange Management (Transfer or issue of Security by a Person Resident Outside India) Regulations, 2000;

4 An investor is a person eligible to invest in the equity shares of insurance companies and includes a 'foreign investor'.

5 'Control' for the purposes of 'Indian owned and controlled' has been defined to include 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 agreements.

6 Section 2(7A) of the Insurance Amendment Act.

7 Prior to the Insurance Amendment Act, the SAT could hear appeals only against the orders passed by the Securities and Exchange Board of India.

8 According to news reports the matter has been fixed for hearing on 9 July, 2015.

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

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

Similar Articles
Relevancy Powered by MondaqAI
Shardul Amarchand Mangaldas & Co
Shardul Amarchand Mangaldas & Co
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Shardul Amarchand Mangaldas & Co
Shardul Amarchand Mangaldas & Co
Related Articles
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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 (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

To Use 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.


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.


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