Guidelines in FDI for insurance firms issued

The Insurance Regulatory and Development Authority of India (Irdai) on Monday said the total foreign investment in Indian insurance companies had been capped at 49 per cent. The regulator gave three months to insurers to comply with these norms from the date of issue of the guidelines.

Ashvin Parekh, managing partner, Ashvin Parekh Advisory Services, said the guidelines provide clarity on foreign investments. The existing shareholders agreements will have to be reworked to comply with the norms. Some insurance companies have already begun work on this.  

Irdai said the regulator might grant another three months to existing insurers to comply for valid reasons.  This extra time would be given provided that the total time taken to comply with “Indian owned and controlled” stipulations does not extend beyond six months.

New insurance companies will have to comply with the norms before registration.

The law will be applicable in case the companies propose to hike their foreign investment from the existing level; or even when they do not intend to increase their current foreign stake from the existing level, Irdai clarified.

Irdai said domestic firms should ensure that a majority of directors, excluding independent ones, are nominated by Indian promoters /investors.

The appointment of key management person, including chief executive officer or managing director or principal officer, should be through the board of directors or by the Indian promoter.

However, key management person, excluding CEO, might be nominated by the foreign investor provided company board approves it.