• UGI USER
  • Jul 19, 2024
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INDIA TO EASE FOREIGN INVESTMENT RULES IN INSURANCE

Why in the news?

  • The Indian government is considering reforms to remove the requirement for resident Indian citizens on the boards and top management of insurers. foreign-owned.
  • Changes to rules on dividend payouts and board composition for insurers with foreign investment exceeding 49% are also under
  • These reforms aim to attract more foreign capital to the insurance sector, following a tepid response to the 2021 increase in the FDI limit from 49% to 74%.

Key Provisions of the Rules

  • Total Foreign Investment includes direct and indirect foreign
  • Direct investment is FDI; indirect is through Indian controlled by foreigners. entities.
  • Over 49% foreign requires half the investment board as independent directors, or one- third if the chairperson is independent.
  • Majority of directors and key management must be resident Indians.
  • At least one key position (chairperson, MD, CEO) must be a resident Indian.
  • Compliance required within one year.
About Insurance Sector in India Legal Framework:

Insurance Act of 1938:

  • First legislation governing all forms of insurance in India.
  • Established rigorous state control over the insurance business.

Nationalisation of Life Insurance (1956):

  • Enacted the Life Insurance Corporation Act 1956 on January 19, 1956.
  • Merged 245 insurance companies into the Life Insurance Corporation of India (LIC).
  • Government contributed Rs. 5 crore in capital.

About Insurance Regulatory and Development Authority of India (IRDAI): 

  • Founded: 1999
  • Objective: Protect insurance customers’ interests
  • Status: Statutory body under IRDA Act 1999, under Ministry of Finance
  • Headquarters: Hyderabad.
  • Functions: Regulates and develops the insurance industry, monitors insurance activities
  • Legal Framework: IRDAI Act 1999 and Insurance Act 1938

IRDAI Vision 2047:

Objective:

  • Ensure every citizen has appropriate life, health, and property insurance by 2047.
  • Support every enterprise with suitable insurance solutions.
  • Make the Indian insurance sector globally attractive.

Key points: Foreign Direct Investment (FDI):

Definition: Investment by a foreign resident in an unlisted Indian company or in 10% or more equity of a listed Indian company.

Examples:

  • BYJU’s raised $500M from Silver Lake (2020).
  • Unacademy raised $150M from SoftBank Group (2020).
  • Benefits: Infuses sustainable capital, technology transfer, strategic sector development, innovation, competition, and employment creation.