India's insurance regulator on Monday clarified that key management personnel in an insurance company excluding the chief executive officer (CEO) can be nominated by the foreign partner.
Interestingly, the key management personnel in an insurance company include the appointed actuary who is said to be the representative of the regulator in the insurer.
Issuing the guidelines on what constitutes "Indian Owned and Controlled" stipulated in the Insurance Laws (Amendment) Act 2015, the Insurance Regulatory and Development Authority of India (IRDAI) on Monday came out with its guidelines, which hold control over the company can be exercised through shareholding, management rights, shareholders agreement, voting agreements and any other manner as per applicable laws.
According to IRDAI, the guidelines are applicable to insurers in which the foreign partner plans to increase its stake and also to those where the overseas promoters do not intend to hike their stakes.
As per the guidelines, majority of the directors, excluding independent directors will be nominated by the Indian promoters and the board would have significant control of the company policies.
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Subject to the approval of the company's board, key management personnel - excluding the CEO - can be appointed by the foreign partner.
As per IRDAI, where the board chairman has a casting vote, then he/she will be nominated by the Indian promoter or investor.
The guidelines also stipulates that the quorum for board meetings will be the presence of the majority Indian directors. This is regardless of the presence of foreign partner's nominee.
The IRDAI has stipulated insurers to file compliance of the "Indian owned and controlled", signed by the CEO and the chief compliance officer after the company board passes a resolution confirming the compliance.
The guideline also stipulates that certified copy of the shareholders agreement, joint venture agreement incorporating clauses that give effect to "Indian owned and controlled' condition be filed with the IRDAI.
The guidelines are applicable to insurance intermediaries having 50 percent or more of their revenue from insurance intermediation.
According to IRDAI, insurers have to comply with the guidelines within three months - extendable by IRDAI by another three months.
