INDIA Trends and Developments Contributed by: Shailaja Lall and Uday Opal, Shardul Amarchand Mangaldas & Co
loss caused to policyholders when deciding the penalty amount. The enhanced penalty framework introduces higher statutory ceilings and structured criteria for penalty determination, signalling a shift towards proportion- ate, transparent and deterrence-oriented enforce- ment. Premium payment The Amendment Act modernises premium payment provisions by expressly recognising electronic pay- ment modes and clarifying the point at which insur- ance risk attaches in digital transactions. In addition, the IRDAI has been vested with explicit powers to regulate the processing, confidentiality and consent- based use of policyholder KYC information. This statutory backing strengthens data governance norms and supports the development of digital-first insur- ance models while addressing concerns around data The FI Amendment Rules ease earlier governance norms for Indian insurers with foreign investment, bringing them in line with domestic peers. • Previously, a majority of the directors on the board and key managerial personnel, as well as at least one amongst the managing director (MD)/chief executive officer (CEO)/whole time director (WTD), had to be resident Indian citizens. protection and misuse. FI Amendment Rules Ease in corporate governance norms • Now, only one amongst the MD, CEO or WTD must be a resident Indian citizen, which aligns with the Companies Act, 2013; other residency require- ments have been omitted. • The requirement for 50% of the board to comprise independent directors (in the case of a non-inde- pendent chairperson) for insurers with over 49% FDI has been removed. • The rule to retain net profit in general reserves when dividends are paid and solvency ratio dips below 1.2x has been dropped. Insurance intermediaries
The FI Amendment Rules also liberalise the regulatory conditions applicable to insurance intermediaries with majority foreign ownership. Insurance intermediaries with majority foreign ownership are no longer required to comply with the following corporate governance requirements (which have now been done away with): • requirement for prior permission of the IRDAI to repatriate dividends; • restriction on payments to the foreign group or pro- moter or subsidiary or interconnected or associate entities, beyond what is necessary or permitted by the IRDAI; and • requirement for the composition of the boards and key management persons to be as specified by the concerned regulators. However, while the initial draft of the rules proposed to remove the requirement of at least one amongst the chair of the board of directors or CEO or principal officer or MD of the insurance intermediary to be a res- ident Indian citizen, this requirement is now retained. These changes reduce compliance burdens and enhance operational flexibility, particularly for multi- national brokerage and distribution platforms. Treatment of foreign venture capital investors (FVCIs) Notably, the FI Amendment Rules expressly include investment by FVCIs within the scope of foreign investment in insurance companies. The policy ration- ale appears to highlight an impetus to the insurance ecosystem encompassing technology-driven busi- ness models, including digital distribution platforms, insurtech ventures and data-driven underwriting solu- tions. Issues relating to investment instruments, exit rights, valuation norms and sectoral conditions may neces- sitate bespoke structuring to ensure compliance across regulatory regimes. For market participants, early engagement with both insurance and foreign exchange regulators is likely to be critical in mitigat- ing execution risk.
218 CHAMBERS.COM
Powered by FlippingBook