INDIA Law and Practice Contributed by: Neeraj Tuli, Celia Jenkins and Rajat Taimni, Tuli & Co
1. Basis of Insurance and Reinsurance Law 1.1 Sources of Insurance and Reinsurance Law The primary legislation regulating the Indian insur- ance sector is the Insurance Act 1938 (the “Insurance Act”) and the Insurance Regulatory and Development Authority Act 1999 (the “IRDA Act”). In 2024, the Min- istry of Finance proposed significant amendments to the Insurance Act and the IRDA Act through the Insur- ance Laws (Amendment) Bill 2024, which – if brought into force in its current form – will result in various significant changes to registration requirements and operational matters. The Bill, however, is yet to be tabled before the Indian Parliament. The Marine Insurance Act 1963 has its basis in the UK Marine Insurance Act 1906. Although the Marine Insurance Act primarily regulates marine insurance, Indian courts (akin to those in the UK) have applied some of its principles to non-marine insurance con- tracts. Indian courts are constitutionally mandated to follow the precedent system, based on the doctrine of stare decisis, as far as questions of law are concerned. The lower courts are bound to follow the decisions of the courts above them in the hierarchy. Therefore, the decisions of the Supreme Court of India are binding on all lower courts. However, it is not uncommon to see conflicting decisions. 2. Regulation of Insurance and Reinsurance 2.1 Insurance and Reinsurance Regulatory Bodies and Legislative Guidance Insurance and reinsurance companies and insurance intermediaries in India are governed by the Insur- ance Regulatory and Development Authority of India (IRDAI). Insurance entities established in the Inter- national Financial Services Centre (IFSC) in India are also governed by the International Financial Services Centres Authority (IFSCA).
Pursuant to the powers granted to the IRDAI under the IRDA Act, the IRDAI has issued various regulations governing the licensing and functioning of insurers, reinsurers and insurance intermediaries. The regu- lations issued by the IRDAI govern a wide range of aspects, including: • registration of Indian insurance and reinsurance companies and foreign reinsurance branch (FRB) offices; • registration of insurance intermediaries; • establishment and closure of liaison offices in India by an insurance company registered outside India; • the assets and solvency margins required to be maintained by insurers; • issuance of capital; • manner of preparation of financial statements; • commission/remuneration and expenses of man- agement (EOM) limits; • outsourcing arrangements; and • corporate governance norms for companies oper- ating in the insurance sector. The regulations issued by the IRDAI govern all insur- ers – namely: • life insurers; • general insurers; • standalone health insurers; and • reinsurers. In addition, the IRDAI regulations govern all insurance intermediaries, which are:
• insurance brokers; • corporate agents; • web aggregators; • third-party administrators; • surveyors and loss assessors; and • insurance marketing firms.
Further, the Foreign Exchange Management (Insur- ance) Regulations 2015 (the “FEMA Insurance Regula- tions”) regulate the manner in which a person resident in India (ie, a person who has been residing in India for more than 182 days in the preceding financial year) can take or continue to hold a general insurance or a life insurance policy issued by an insurer outside India.
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