Irdai’s FDI norms puzzle insurance cos

In tune with the Budget announcement, regulator Irdai has notified foreign direct investment (FDI) limit in insurance intermediaries to 100 per cent. However, it has specified a few conditions that the industry finds difficult to be com- plied.

In the last Budget, the Centre had announced that the FDI limit would be raised from 49 per cent to 100 per cent for insurance intermediaries like aggregators, brokers, marketing firms and corporate agents. The Insurance Regulatory and Development Authority of India has notified the same by laying down norms to be followed by intermediaries that have majority shareholding of foreign investors. Irdai wants such companies to have at least one top executive—the Chairman of the Board of Directors or Chief Executive Officer or Principal Officer or Managing Director— to be a resident Indian citizen.

Also, the majority of the directors on the board should be resident Indian citizens. Further, the majority of key management persons also should be resident Indian citizens.

According to industry experts, the companies could find it difficult to comply with these norms. “We are a bit confused how companies with majority in foreign shareholding can have resident Indians as majority board directors and key management people. We need to have more clarity on this,” said an expert. Further, the companies should take Irdai’s prior permission for repatriating dividend. It should not make payments, other than dividend, to related parties taken as a whole, beyond 10 per cent of the total expenses of the company in a financial year.

“How can a company assess the expenses in a financial year beforehand?” he asked.

Irdai also wants them to make disclosures on payments made to its group or promoter or subsidiary or interconnected or associate entities in the specified format. The company also should be incorporated as a limited company and bring in the latest technological, managerial and other skills.

Irdai says a key managerial per- sonnel and most directors should be resident Indians