New Delhi: With 49 percent FDI being allowed in insurance sector, regulator IRDAI Monday said Indian promoters will have control over appointment of majority of directors and that of key management persons, including CEOs.
However, foreign investors can nominate non-CEO key management persons provided such an appointment is approved by the board where majority of the directors, excluding independent members, are the nominees of Indian investors, IRDAI said while issuing its guidelines for "Indian owned and controlled" insurance companies.
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Stating that "both direct and indirect holding in an Indian insurance company shall not exceed 49 percent", the regulator said existing companies need to comply with these guidelines within three months.
However, an extension can be given by IRDAI "for valid reasons" for a further period of three months.
The insurance companies coming into existence post issuance of these guidelines would need to comply with these guidelines before grant of certificate of registration.
These guidelines, which have come into force with immediate effect, would apply to those companies that plan to hike their foreign investment from the existing level, as also to those that do not intend to increase their current foreign stake from the existing level.
The government has hiked the foreign investment limit in insurance sector to 49 percent, from 26 percent previously.
These guidelines were being keenly awaited by insurers seeking to increase foreign investment to bring into effect the higher limits that became a law earlier this year.
A number of foreign insurers have evinced interest in hiking their exposure to the Indian insurance sector.
Explaining the definition of control in its new
guidelines, IRDAI said the control can be exercised by any one or more of the five criteria -- virtue of shareholding, management rights, shareholders agreements, voting agreements and any other manner as per the applicable laws.
On Indian control, it said the Indian insurance company would need to ensure that the "majority of the directors excluding independent directors should be nominated by the Indian promoter(s)/Indian investor(s)".
They also need to ensure that the appointment of key management person including CEO, Managing Director, Principal officer should be through the Board of Directors or by the Indian promoter(s) and/or Indian investor(s).
"However, Key Management Person(s) excluding CEO may be nominated by the foreign investor provided that the appointment of such Key Management person is approved by the Board of Directors, wherein majority of the directors excluding independent directors are the nominees of Indian promoter(s)/Indian investor(s).
"The control over significant policies of the insurance company should be exercised by the Board, provided that the constitution of the Board is compliant with... (the requirement of a majority appointment by Indian promoters".
In case of the Chairman of the Board having a casting vote, such Chairman should be nominated by the Indian promoter and/or the Indian investor, IRDAI said.
These guidelines are also applicable to Insurance Intermediaries such as Brokers, Third Party Administrators, Surveyors and Loss Assessors etc.
However, in case of an insurance intermediary having more than 50 percent of its revenue from the non-insurance activities, these guidelines shall not be applicable to such insurance intermediaries.
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