The Department for Promotion of Industry and Internal Trade (DPIIT) on Tuesday amended the Consolidated Foreign Direct Investment Policy 2017 (FDI Policy) to allow 100 per cent FDI in insurance intermediaries through the automatic route.
This includes insurance brokers, reinsurance brokers, insurance consultants, corporate agents, third-party administrators, and surveyors and loss assessors. Till now, FDI up to 49 per cent was allowed in insurance intermediaries through the automatic route.
As far as insurance companies are concerned, foreign investment of up to 49 per cent is allowed through the automatic route, subject to the approval of the insurance regulator. And, the norms for insurance companies specify that the ownership and control of the firms must remain with resident Indian entities.
In case of an insurance intermediary, if majority is held by foreign investors, then the company has to be incorporated as a limited company under the provisions of the Companies Act, 2013. Also, one among the chairman, chief executive officer, principal officer, or managing director should be an Indian resident.
The entity will have to take prior permission from the insurance regulator for repatriating dividends. If it is owned by foreign investors it will have to bring in latest technological, managerial and other skills. Also, such entities will not make payments to the foreign group, promoter, subsidiary, or interconnected or associated entities beyond what is permitted by the regulator.
The announcement in this regard came in the interim budget of July 2019. Subsequently, on September 2, 2019, the Union government notified the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2019.