The insurance regulatory reforms in early 2015 increased the permitted equity investment of foreign insurers from 26% to 49%. However, insurers and intermediaries will now need to demonstrate "Indian control" of the company. The regulator has clarified the requirement to mean that entities in the insurance sector must be primarily driven by their boards where majority voting power lies in the hands of nominee directors of Indian entities. Foreign partners will need to find innovative ways to maximise control and protect their investment – possibly leading to the restructuring of a number of joint ventures.
New regulations on branches of foreign reinsurers have introduced an order of preference system which requires Indian insurers to offer risks to entities holding a higher preference before approaching those lower down the ranking. This will mean that a certain category of foreign branches will be on a par with Indian reinsurers, while non-admitted foreign reinsurers without Indian branches will be squeezed out over time. However, reinsurers with branches will undoubtedly benefit in terms of seeing quality risks. This increased competition will benefit the industry overall.
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.
