31 October, 2016
IRDAI (Registration of Indian Insurance Companies) (Eighth Amendment) Regulations, 2016
The Insurance Regulatory and Development Authority of India (‘IRDAI’) has notified the IRDAI (Registration of Indian Insurance Companies) (Eighth Amendment) Regulations, 2016 (‘IRDAI Amendment’), on July 25, 2016. Regulation 11 of the erstwhile regulations provided that foreign investment in insurance companies is to be calculated as the aggregate of: (i) quantum of paid-up equity share capital held by foreign investors (including foreign venture capital investors) in the insurance company; and (ii) proportion of the paid-up equity share capital held or controlled by each such foreign investor either by itself or through its subsidiary compa- nies in the Indian promoter / Indian investor of the insurance company. Pursuant to the IRDAI Amendment, (ii) above is no longer applicable to an Indian promoter / any Indian investor of listed Indian insurance companies where the concerned Indian promoter / Indian investor is regulated by RBI, SEBI and / or the National Housing Bank.
IRDAI (Listed Indian Insurance Companies) Guidelines, 2016
The salient features of the IRDAI (Listed Indian Insurance Companies) Guidelines, 2016 (‘IRDAI Guidelines’) issued by IRDAI on August 5, 2016, which will apply to all insurers whose equity shares are listed on stock exchanges and to the allotment process pursuant to a public issue, are as follows:
Any transfer / arrangement or agreement to transfer between 1% to 5% of the paid up equity share capital of an insurer by any person will be subject to the “fit and proper” criteria – creating an exemption from the operation of Section 6A of the Insurance Act, 1938, which requires prior IRDAI approval for transfers in excess of 1% of the share capital of an insurer. Assessment of whether the “fit and proper” criteria are satisfied by an acquirer would be based on an analysis of, inter alia, past regulatory record, existence of any convictions / investigations by revenue or regulatory authorities and credit rating, etc.
Any acquisition / arrangement or agreement for acquisition that will or is likely to take the aggregate holding14 of an acquirer to 5% or more of the paid-up equity share capital of the insurer or entitles such person to exercise 5% or more of the total voting rights of the insurer, will require prior approval of IRDAI in the manner specified under the IRDAI Guidelines;
Any fresh acquisitions by a shareholder already having / likely to have an aggregate holding to the extent of 5% or more of the paid up equity share capital of the insurer: (a) where such acquisition results in the aggregate holding of such shareholder up to 10% of the shares/ voting rights of the insurer, will not require prior approval of IRDAI; and (b) where such acquisition results in the aggregate holding of such shareholder exceeding 10% of the paid up equity share capital / voting rights of the insurer, will require fresh approval of IRDAI; and
Minimum holding by promoters / promoter group is required to be maintained at 50% of the paid up equity capital of the insurer at all times. However, in cases where the present holding of the promoters is below 50%, such holding will be considered to be the minimum holding.
IRDAI issues Discussion Paper on Listing of Indian Insurance Companies
IRDAI has issued a discussion paper on listing of Indian insurance companies on August 11, 2016, which inter alia provides for: (i) all general insurance companies, including standalone health and reinsurance companies to mandatorily take steps to list their shares upon completion of eight years of operations; (ii) all life insurance companies to mandatorily list their shares upon completion of 10 years of operations; (iii) all insurance companies that have already exceeded the number of years of operation indicated in (i) and (ii) to initiate steps to ensure that they list their shares within a period of three years from the date of issue of the proposed guidelines; and (iv) Indian insurance companies that meet the above criteria to: (a) take up the matter of listing with their respective board of directors within a period of three months from the date of issue of the proposed guidelines; (b) file the roadmap for an initial public offering (‘IPO’), duly approved by their respective board of directors, with IRDAI within a period of 45 days from the date of such approval; and (c) initiate process of IPO in accordance with the approved roadmap within such period as may be approved by IRDAI.
14 ‘Aggregate holding’ has been defined in the IRDAI Guidelines to mean the total holding through acquisition and the shares held by the applicant, his relatives, associate enterprises and persons acting in concert with him.
For further information,
Zia Mody, Partner, AZB & Partners