IRDAI may look for Indian faces in all top posts in insurers

While FDI hike by foreign partners to 49% may get them a higher level of shareholding, their role would be limited

Insurance Regulatory and Development Authority of India (IRDAI) would look to have Indian executives in all top posts including chairman, chief executive and actuarial/underwriting positions.

While a foreign direct investment hike by foreign partners to 49% may get them a higher level of shareholding in the company, but their role would be limited.

Regulatory officials said that the aim is to have Indian promoters and stakeholders control the day-to-day functioning of the company.

"While the foreign partners will play a key role with respect to suggesting newer strategies for growth, it would require the Indian partner's approval. The onus is on us to ensure management control rests fully with Indian not only in the management structure but also in the way business is done," an official said.

While foreign executives may not be banned per se, but the regulator would look into their appointment closely before giving their nod. All senior level appointments in private insurers require IRDAI approval.

Currently, there is no bar on foreigners holding position of a chief executive. However, industry sources said that since everyday decisions are taken in consultation with the CEO, an Indian would be preferred.

Further, Existing shareholder agreements will have to be completed re-written to ensure that no wording in the agreement gives any additional powers to the foreign partner. Presently, foreign partners do enjoy rights including rights of voting and board membership in proportion to their stake. Therefore, even when their stake increases, they would not have any addition of rights.

Here, industry chief executives said that apart from a hike in stake, there would be no significant gain for the foreign partner. "While large global players are committed to their India businesses for a long term, there is some displeasure of them not getting enough voting or veto powers," said the chief executive of a large private life insurance company.

Since the Insurance Laws (Amendment) Act said that all insurers will have 'Indian management and control', regulatory officials said that this would mean no 'exclusivity' of foreign promoters in areas like CEO appointments, board positions or even company decisions on strategy and products.

Indian management and control has been a bone of contention of the insurance companies. While foreign partners were not pleased with the inclusion of this clause at the last moment in the Insurance Act, they have been awaiting clarifications on what rights would be given to them.