In a move that'll enable foreign brokerage firms to venture into Indian insurance space, the Department for Promotion of Industry and Internal Trade (DPIIT) has notified amendment to the Foreign Direct Investment (FDI) policy, allowing 100 per cent FDI in insurance intermediaries.
These intermediaries include insurance brokers, re-insurance brokers, insurance consultants, corporate agents, third party administrator, surveyors and loss assessors.
The announcement regarding 100 per cent FDI for insurance subsidiaries was made by Union Finance Minister Niramala Sitahraman in her Budget speech last year. "FDI inflows into India have remained robust despite global headwinds...I propose to further consolidate the gains in order to make India a more attractive FDI destination," she had said.
So far, FDI in the insurance sector was capped at 49 per cent under automatic route. Notably, FDI for insurance companies is still capped at 49 per cent.
As per the new policy, no Indian company will allow "aggregate holdings" by way of "total foreign investment" in its equity shares by foreign investors, including portfolio investors, to exceed 49 per cent of the paid up equity capital of such Indian insurance company.
Allowing foreign insurance subsidiaries to buy 100 per cent stake in Indian companies will enable them to sell and target new products to its clients, while bringing global practices in the country. The policy says an insurance intermediary that has majority shareholding of foreign investors will be incorporated as a limited company under the provisions of the Companies Act, 2013.
Also, at least one from among the chairman of the board of directors or the CEO or principal office or MD of an insurance subsidiary should be an Indian resident. Such intermediaries are also required to take prior permission of the authority concerned before repatriating dividend.
The policy also says that foreign intermediaries are not permitted to make payments to any foreign group or promoter or subsidiary or interconnected or associate entities beyond what is mandated.