Private participation in the Indian insurance industry was first permitted in 1999, however it has been subject to various domestic and foreign restrictions. The Indian government is now attempting to relax certain restrictions and proposed legislation has been laid before the Indian Parliament.
The key proposed changes are:
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As mentioned in our previous edition of Insurance Update, to increase the cap on foreign investment from 26% to 49%.
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To allow non-domestic reinsurers to open Indian branch offices which will eliminate the need for foreign reinsurers to conduct business with an Indian partner.
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To abolish the requirement for Indian “promoters” (i.e. controlling shareholders) to reduce their shareholding to 26% or lower within 10 years of the insurer commencing business.
In addition:
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The Indian insurance regulator is developing a standard methodology for valuing insurance companies for IPO purposes, and this may have a consequential impact on valuing share transfers between shareholders of private domestic insurance companies.
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The Indian insurance regulator has published draft guidelines on corporate governance which include prescribing an application of “fit and proper” criteria to directors and senior management, detailing the responsibilities of the board of directors, prescribing guidelines for outsourcing by domestics and requiring employee whistle blowing policies.
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For further information, please contact:
Kunal Thakore (kunal.thakore@linklaters.com, (852) 2901 5280);
Zebaysh Hirji (zebaysh.hirji@linklaters.com, (44 20) 7456 3123).
