The Indian government’s insurance law reforms, proposed under the Insurance Laws (Amendment) Bill (the Amendment Bill), have been formally proclaimed as an Ordinance. This means that the Amendment Bill has temporary effect as an Act of Parliament, despite not being passed as such.
The general focus of the Amendment Bill is to open up the country’s insurance market to increased foreign investment by “foreign companies”, principally by permitting foreign investors to hold up to 49% equity in Indian insurance companies. However, “Indian management and control” has been defined to ensure that this remains with Indian companies in relation to insurance.
A notable amendment is seen in the definition of a “foreign company”. This now includes a company or body established under a law of any country outside India. Consequently, Lloyd’s of London falls within this definition and its entry into the country’s insurance sector is made possible.
We point out that any insurer wishing to conduct insurance business in India must be registered. Public companies, co-operative societies, foreign companies operating through a branch (reinsurance only) and statutory bodies established by acts of Parliament are subject to registration requirements in order to do business in India. To become registered, different types of insurer require different minimum amounts of paid up capital – for life, health and general insurance this is approximately US$16 million and for reinsurance business this is approximately US$32 million. This excludes initial expenses regarding formation and registration of the (re)insurance company.
Although, the Amendment Bill permits greater foreign investment in the Indian insurance sector, with some insurers already signalling their intention to increase investment in joint ventures with local insurance companies, it should be borne in mind that the decree remains temporary in status and unless approved by Parliament within six weeks, it will no longer operate.