By a Gazette Notification dated 15th March, 2021, a Bill has been introduced in the Rajya Sabha to further amend the Insurance Act, 1938 (“Act”).
The Act after getting assent of the President will be called the Insurance (Amendment) Act, 2021. The amendments are as follows –
|
Provision |
Principal Act | Proposed Amendment | Implication |
| Section 2 – Definitions | (7A) “Indian insurance company” means any insurer, being a company which is limited by shares, and, —
(a) which is formed and registered under the Companies Act, 2013 (18 of 2013) as a public company or is converted into such a company within one year of the commencement of the Insurance Laws (Amendment) Act, 2015 (5 of 2015);
(b) in which the aggregate holdings of equity shares by foreign investors, including portfolio investors, do not exceed forty-nine per cent. of the paid up equity capital of such Indian insurance company, which is Indian owned and controlled, in such manner as may be prescribed.
……….. |
(7A) “Indian insurance company” means any insurer, being a company which is limited by shares, and, —
(a) which is formed and registered under the Companies Act, 2013 (18 of 2013) as a public company or is converted into such a company within one year of the commencement of the Insurance Laws (Amendment) Act, 2015 (5 of 2015);
(b) in which the aggregate holdings of equity shares by foreign investors including portfolio investors, do not exceed seventy-four per cent. of the paid-up equity capital of such Indian insurance company, and the foreign investment in which shall be subject to such conditions and manner, as may be prescribed;
……….. |
As per the proposed amendment, the definition of “Indian insurance company” has been amended. A company will now be an Indian insurance company if its aggregate holdings of equity shares by foreign investors including foreign investors does not exceed 74% as opposed to the earlier percentage of 49%. |
| Section 27 – Investment of assets | 27. Investment of assets. —
(1) Every insurer shall invest and at all times keep invested assets equivalent to not less than the sum of— …………….. (7) The assets required by this section to be held invested by an insurer incorporated or domiciled outside India shall, except to the extent of any part thereof which consists of foreign assets held outside India, be held in India and all such assets shall be held in trust for the discharge of the liabilities of the nature referred to in sub-section (1) and shall be vested in trustees resident in India and approved by the Authority, and the instrument of trust under this sub-section shall be executed by the insurer with the approval of the Authority and shall define the manner in which alone the subject-matter of the trust shall be dealt with.
Explanation. —This sub-section shall apply to an insurer incorporated in India whose share capital to the extent of one-third is owned by, or the members of whose governing body to the extent of one-third consists of members domiciled elsewhere than in India. |
27. Investment of assets. —
(1) Every insurer shall invest and at all times keep invested assets equivalent to not less than the sum of— …………….. (7) The assets required by this section to be held invested by an insurer incorporated or domiciled outside India shall, except to the extent of any part thereof which consists of foreign assets held outside India, be held in India and all such assets shall be held in trust for the discharge of the liabilities of the nature referred to in sub-section (1) and shall be vested in trustees resident in India and approved by the Authority, and the instrument of trust under this sub-section shall be executed by the insurer with the approval of the Authority and shall define the manner in which alone the subject-matter of the trust shall be dealt with.
Explanation. —This sub-section shall apply to an insurer incorporated in India whose share capital to the extent of one-third is owned by, or the members of whose governing body to the extent of one-third consists of members domiciled elsewhere than in India. |
The explanation under the provision for Investment of assets has now been omitted. |
| Section 114 (2) – Power of Central Government to make rules | (2) In particular and without prejudice to the generality of the foregoing power, such rules may prescribe—
(aaa) the manner of ownership and control of Indian insurance company under sub-clause (b) of clause (7A) of section 2:
……………….. |
(2) In particular and without prejudice to the generality of the foregoing power, such rules may prescribe—
(aaa) the conditions and manner of foreign investment under sub-clause (b) of clause (7A) of section 2
……………….. |
As per the amendment, the Central Government can make Rules w.r.t. the conditions and manner of foreign investment as opposed to the manner of ownership and control of Indian insurance company. |
Source : Rajya Sabha
