India: 100% FDI In Insurance Intermediaries: A Welcome Change

Last Updated: 3 October 2019
Article by Shubhangi Pathak and Priya Misra


Relaxation of foreign investment limits in the insurance sector has been a subject of much debate over a period of time. Various stakeholders, including industry participants have advocated in favour of increase of foreign investment in the insurance sector. As a first step towards achieving this end, on 26th December 2014, the Insurance Laws (Amendment) Ordinance 2014 (Ordinance) was introduced to increase the permitted limit of foreign direct investment (FDI) in the Indian insurance companies from 26% to 49%[[1]]. Subsequent to the Ordinance, the Indian Insurance Companies (Foreign Investment) Rules 2015 (Foreign Investment Rules) were notified. As regards insurance intermediaries, Rule 9 of the Foreign Investment Rules stipulated that in parity with insurance companies, the foreign investment in insurance intermediaries shall be capped at 49%.

It was however felt that parity in the FDI limits was unfair, as unlike insurance companies, insurance intermediaries are not custodians of policyholders' monies. As a result, over a period of time, various representations were made before the Insurance Regulatory Development Authority of India (IRDAI) by the industry stakeholders for relaxation of the FDI limit applicable to insurance intermediaries.

On 5th July 2019, the present Indian finance minister, Ms Nirmala Sitharaman, in her budget speech, proposed for the FDI limit in insurance intermediaries to be increased from 49% to 100%. Subsequently, on 2nd September 2019, the union government notified the Indian Insurance Companies (Foreign Investment) Amendment Rules 2019 (Amendment Rules), which effectively increased the limit on FDI in insurance intermediaries to 100%.

Amendment Rules

Pursuant to the amendment, inter alia, Rule 9 of Foreign Investment Rules, has been amended. Rule 9 now states that there shall be no cap on foreign equity investment for intermediaries or insurance intermediaries. However, where an entity whose primary business is outside insurance, is allowed by the IRDAI to function as an insurance intermediary, the foreign equity investment caps applicable in that sector shall continue to apply to such intermediary, subject to the condition that the revenues of such entities from the primary (non-insurance related) business remain above 50% of their total revenues in any financial year.

Rule 9 of the Foreign Investment Rules further stipulates that the proposals for FDI in relation to insurance intermediaries will be allowed under automatic route, subject to verification by the IRDAI. The Amendment Rules further stipulate that an insurance intermediary that has majority shareholding of foreign investors shall:

a) Be incorporated as a limited company under the provisions of the Companies Act 2013;

b) Undertake that at least one person from amongst the Chairman of the Board of Directors or the Chief Executive Officer or Principal Officer or Managing Director of the insurance intermediary shall be a resident Indian citizen;

c) Take prior permission of IRDAI for repatriating dividend;

d) Bring in the latest technological, managerial and other skills;

e) Not make payments to the foreign group or promoter or subsidiary or interconnected or associate entities beyond what is necessary or permitted by IRDAI;

f) Make disclosures in the formats to be specified by IRDAI of all payments made to its group or promoter or subsidiary or interconnected or associate entities;

g) Ensure that composition of the Board of Directors and key management persons shall be as specified by the concerned regulators.

Applicability of IOC Guidelines - Need for Clarity

In addition to the provisions of the Foreign Investment Rules, insurance companies as well as insurance intermediaries are required to adhere to the Indian owned and controlled norms as notified by the IRDAI. In this regard, insurance intermediaries are required to comply with the IRDAI's "Guidelines on Indian Owned and Controlled" of 19th October 2015 (IOC Guidelines). The IOC Guidelines stipulate that every insurance intermediary must be "Indian owned and controlled" at all times. To ensure "Indian control" the following requirements must be complied with by an entity:

a) The majority of the Board of Directors, excluding independent directors, must be nominated by the Indian promoters/Indian investors;

b) Key management persons including the CEO and the Principal Officer should be appointed by the Board of Directors or by the Indian promoters/Indian investors;

c) Control over "significant policies" should be exercised by an appropriately constituted Board of Directors;

d) In cases where the Chairman of the Board of Directors has a casting vote, the Chairman must be nominated by the Indian promoters/Indian investors;

e) Valid quorum for a board meeting is considered to be constituted with the presence of majority of the Indian directors.

It is pertinent to note that since the notification of the Amendment Rules, the IRDAI has not issued any notification or circular to provide clarity regarding the continued applicability (if at all) of the IOC Guidelines to insurance intermediaries, in light of the relaxation to the FDI limit. However, with the notification of the Foreign Investment Rules, the provisions of the IOC Guidelines may be considered to be effectively overridden.


While majority of the insurance intermediaries have welcomed the introduction of 100% FDI there are certain domestic players who have expressed reservations regarding this step. These players fear that 100% FDI in insurance will adversely impact the business of small domestic insurance intermediaries which are completely owned and controlled by Indian entrepreneurs. It remains to be seen what steps (if any) will be taken by the IRDAI to ensure that a step towards encouraging foreign investment does not lead to the interests of domestic players being disproportionately compromised. In addition, there is also a need to amend the IOC Guidelines to bring the same in conformity with the Foreign Investment Rules.

[1] The Ordinance was subsequently replaced by the Insurance Law (Amendment) Bill 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
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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