Mandatory compliances introduced for registration of an Indian Insurance Company having foreign investment

The Insurance Regulatory and Development Authority of India (IRDAI) has passed Insurance Regulatory and Development Authority of India (Indian Insurance Companies) (Amendment) Regulations, 2021 on July 07, 2021, by amending the corresponding regulations which are mentioned herein:

• Amendment to Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations, 2000

1. Regulation 5A, which specifies Requirement of Resident Indian citizenship for Directors, Key Management Persons, etc. has been Inserted, namely:
   1. an Indian Insurance Company having foreign investment, —
2. majority of its directors,
3. a majority of its Key Management Persons, and
4. at least one among the chairperson of its Board, its managing director and its Chief Executive Officer, shall be Resident Indian Citizens.
5. Regulation 5B, which specifies Requirements for foreign investment exceeding forty-nine percent has been Inserted, namely:

In an Indian Insurance Company having foreign investment exceeding 49%.

1. for a financial year for which dividend is paid on equity shares and for which at any time solvency margin is less than 1.2 times the control level of solvency, not less than fifty percent of net profit for the financial year shall be retained in general reserve; and
2. not less than 50% of its directors will be independent directors, unless the chairperson of its Board is an independent director, in which case at least one-third of its Board shall comprise of independent directors.”.
3. Regulation 10(2) (f)&(g), which specifies application for registration have been omitted.
4. Regulation 29, which specifies Registration of existing insurers has been omitted.
5. Regulation 30, which specifies transitory Provisions has been omitted.
6. Regulation 31A, has been Inserted namely:
7. Every Indian Insurance Company having foreign investment, existing on or before the date of commencement of the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2021, shall within one year from the commencement of the rules, comply with the requirements of the provisions of regulation 5A of these regulations.
8. An undertaking confirming compliance with provisions of Regulation 5A shall be filed by the Indian Insurance Company duly signed by the Chief Executive Officer and Chief Compliance Officer within 45 days from the date of the meeting of the Board of Directors, whereat such compliance has been confirmed.

• Every undertaking shall be accompanied by:

1. A certified copy of resolution passed by the Board of Directors confirming the compliance of sub-regulation (1);
2. where applicable, certified copy of the agreement / Joint venture Agreement where amendments to the agreement / joint venture agreement have been carried out to give effect to the provisions of these regulations.
3. An existing Indian Insurance Company with foreign investment exceeding 49 percent shall ensure compliance with regulation 5B of these regulations.

• Amendment to Insurance Regulatory and Development Authority of India (Transfer of Equity Shares of Insurance Companies) Regulations, 2015

1. In Form B, row 16, has been substituted, namely:

“Where the Indian Insurance Company has Foreign investment, status of compliance of regulation 5A of Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations, 2000. (please attach a brief note on the same)”.

2. In Form B, row 17, has been substituted, namely:

“Where the Foreign investment in an Indian Insurance Company exceeds or shall exceed 49 percent, status of compliance of regulation 5B of Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations, 2000. (please attach a brief note on the same)”.

• Amendment to Insurance Regulatory and Development Authority of India (Issuance of Capital by Indian Insurance Companies Transacting Life Insurance Business) Regulations, 2015 

1. Regulation 5(2)(vi), which specifies Consideration of application has been substituted, namely:

“Compliance with the Indian Insurance Companies (Foreign Investment) Rules, 2015 and any guidelines issued by the Authority in this regard;”

2. Regulation 7(b), which specifies circumstances of non-approval from authority, has been substituted, namely:

“Consequent upon the dilution of shareholding by the promoter(s) and / or Investor (s) or issue of fresh capital, the applicant company shall not be compliant to the Regulation 5A and / or 5B of Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations, 2000”.

3. In Form A which specifies Application for approval in terms of IRDAI, Para13 has been substituted namely:

“Confirmation of compliance with Indian Insurance Companies (Foreign Investment) Rules, 2015:

M/s …………………………. hereby confirms that it is compliant with the requirements of Section 2 (7A) (b) of the Act read with Indian Insurance Companies (Foreign Investment) Rules, 2015 and Regulations and any guideline issued by the Authority and shall continue to be compliant after the issue of capital in accordance with this application.”.

• Amendment to Insurance Regulatory and Development Authority of India (Issuance of Capital by Indian Insurance Companies Transacting other than Life Insurance Business) Regulations, 2015 

1. Regulation 5(2)(vi), which specifies consideration of application, has been substituted, namely:

“Compliance with the Indian Insurance Companies (Foreign Investment) Rules, 2015 and any guidelines issued by the Authority in this regard;”.

2. Regulation 7(b), which specifies circumstances of non-approval from authority, has been substituted, namely:

“Consequent upon the dilution of shareholding by the promoter(s) and / or Investor (s) or issue of fresh capital, the applicant company shall not be compliant to the Regulation 5A and / or 5B of Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations, 2000.”.

3. In Form A, which specifies Application for approval in terms of IRDAI, Para 13 has been substituted, namely:

“Confirmation of compliance with Indian Insurance Companies (Foreign Investment) Rules, 2015: M/s …………………………. hereby confirms that it is compliant with the requirements of Section 2 (7A) (b) of the Act read with Indian Insurance Companies (Foreign Investment) Rules, 2015 and Regulations and any guideline issued by the Authority and shall continue to be compliant after the issue of capital in accordance with this application.”.

*Tanvi Singh, Editorial Assistant has put this story together.