The Department of Financial Services, Ministry of Finance (MoF) has issued an office memorandum, proposing certain amendments to the provisions of the Insurance Act, 1938 (Insurance Act), Life Insurance Corporation Act, 1956, and Insurance Regulatory and Development Authority Act, 1999 (Office Memorandum). Additionally, it has also released a Performa document containing the details and the precise text of the proposed changes to the above laws and the same has been currently placed in the public domain for public consultation (Performa Document).
These proposed amendments focus primarily on promoting policyholders’ interests, enhancing the financial security of the policyholders, facilitating entry of more players in the insurance market leading to economic growth and employment generation, enhancing efficiencies of the insurance industry, enabling ease of doing business and enhancing insurance penetration to achieve goal of ‘Insurance for All by 2047’.
The key changes sought to be introduced include inter alia the following aspects:
- Raising the FDI Limit in Indian Insurance Companies from 74% to 100
A new provision, Section 3AA, is proposed to be introduced under the Insurance Act. As per Section 3AA, the aggregate holdings of equity shares by foreign investors including portfolio investors in an Indian insurance company may extend up to one hundred percent, subject to the conditions as may be governed by the applicable laws.
- Enabling an insurer to carry on one or more classes of insurance business and activities related/incidental to insurance
Presently, under the Insurance Act, Section 2(7A) defines an ‘Indian Insurance Company’ to mean inter alia an insurer “whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurance business.” The aforesaid restriction prescribed under definition Section 2(7A) is proposed to be omitted. Further, identical changes to remove this restriction have been carried out under the Insurance Act, including inter alia with respect to capital requirements, separation of accounts and funds, etc.
- Additionally, the proposed amendments aim to empower the sectoral regulator, Insurance Regulatory and Development Authority of India, to specify lower entry capital (not be less than Rs. 50 crores), for under-served or un-served segments on special case basis.
For more details, kindly refer to these documents published by the MoF, available by clicking on these links –link (Office Memorandum) and link (Performa Document).
Authors & Contributors
Partner(s):
Associate(s):
Keshav Pareek
Ishaan Gupta
Shivani Pattnaik