The Insurance Laws (Amendment) Act, 2015, passed during Parliament’s budget session, allowed insurance companies to raise their foreign ownership from 26% to 49%, with the requirement that the company be Indian owned and controlled.
IRDAI said the majority of directors, excluding independent directors, will have to be nominated by Indian promoters or Indian investors. According to the guidelines, even the appointment of key management persons that include chief executive officer, managing director or principal officer in case of an insurance broker will have to be through them or the board of directors.
The guidelines, however, allowed for the nomination of key persons except the chief executive officer by foreign investors, provided such appointments are approved by the board, which must have a majority of directors that are the nominees of Indian promoters or investors.
“Now that Irda has clarified the management controls, the process of approving foreign direct investment (FDI) hike will be quick,” said Anuraag Sunder, director, insurance, PwC India. “FDI hike has to be approved by the Foreign Investment Promotion Board (FIPB) first, then the Competition Commission of India (CCI) and, ultimately, Irda.
According to Sunder, when the sector opened up to private insurers, Indian promoters didn’t have the expertise to run the insurance business.
