The rules also require such insurance companies to have 50 per cent of its directors as independent directors unless the chairperson of its board is herself or himself one
The finance ministry
has notified the Indian Insurance Companies
(Foreign Investment) Amendment Rules, 2021 that require insurers
with foreign ownership of over 49 per cent to maintain a solvency margin of 180 per cent if they declare dividend payments in a financial year.
The government had sought public comments on draft rules issued on April 15, and has now notified the rules further to amend the Indian Insurance Companies
(Foreign Investment) Rules, 2015.
According to the rules notified, if insurance companies
with foreign ownership above 51 per cent repatriate profits in the form of dividend to their shareholders, but cannot meet the 180 per cent margin requirement, they will have to set aside 50 per cent of their net profit in a general reserve.
The rules also require such insurance companies to have 50 per cent of its directors as independent directors unless the chairperson of its board is herself or himself one. In that case at least one-third of its board should have independent directors.
The changes also mandate Indian insurance companies, with foreign investment, to have the majority of its directors and key management persons as resident Indians. They also state at least one among the three--the chairperson of the board, managing director (MD), and chief executive officer (CEO)--must be a resident Indian. Insurers
will get one year to comply with these norms.
Parliament, in March, had approved the Insurance (Amendment) Bill, 2021, to hike the FDI limit in insurance to 74 per cent.