Introduction:
By way of an update, the IRDAI has notified the IRDAI (Insurance Brokers) (First Amendment) Regulations 2018 (First Amendment). The First Amendment amends Schedule II - Form R under R20 (2) of the IRDAI (Insurance Brokers) Regulations 2018 (Brokers' Regulations).
R20(2) of the Brokers' Regulations:
R20(2) of the Brokers' Regulations states that the manner of calculating the holding of equity shares by one or more foreign investors (in the applicant), shall be as per details prescribed in Schedule II – Form R of the Brokers' Regulations.
Schedule II - Form R of the Brokers' Regulations prescribes that the calculation of the equity share holding of the foreign investor(s) in the applicant shall be the aggregate of the foreign investor's equity share capital in the applicant and the proportion of paid up equity share capital held or controlled either by the foreign investor itself or through its subsidiary in an Indian promoter or Indian investor of the applicant.
The Explanation under ¶(1)(b)(ii)(ii) of Schedule II - Form R of the Brokers' Regulations stipulates that where the Indian promoter of an insurance broker, is registered as a company under the Companies Act 2013, the Indian promoter shall not be a "subsidiary" as defined in §2(87) of the Companies Act 2013.
Amendment to the Explanation:
By way of the First Amendment, a proviso is now added to the Explanation under ¶(1)(b)(ii)(ii) of Schedule II - Form R, which clarifies that:
"Provided the Chairman, IRDAI may relax the condition of the Indian promoter not being a subsidiary company as defined the above section of the Companies Act, 2013 subject to merits and conditions, considering the interest of the policyholders and overall growth and development of the insurance sector."
Based on the foregoing we note that the First Amendment now expressly grants the IRDAI Chairman the power to relax the restriction on an Indian promotor not being a subsidiary of any other company in the interests of the policyholders and the sector at large, by assessing the merits and conditions on a case by case basis.
The First Amendment came into force on 25th January 2019.
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