Appointment of Common Directors between Intermediaries and Insurers IRDAI Resolves the Conundrum!

Common Directors under Section 48A of the Insurance Act, 1938

The appointment of the same individual on the Board of Directors (“Board”) of both an insurer and an insurance intermediary (brokers, corporate agents and web aggregators) (“Common Director”) is currently prohibited under Section 48A[1] of the Insurance Act, 1938 (“Act”). However, the Insurance Regulatory and Development Authority of India (“IRDAI”) is empowered to permit an intermediary to be a director on the Board of an insurance company subject to the conditions and restrictions as may be imposed by the IRDAI. Therefore, if an insurer were to appoint Common Directors on its Board, a prior IRDAI approval is a critical requirement.

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Evolving Insurance Landscape in IFSC

The Gujarat International Financial Tec-City (“GIFT City”) in Gandhinagar, Gujarat, is India’s first operational greenfield smart city, housing a domestic tariff zone and an International Financial Services Centre (“IFSC”) in a Multi-service Special Economic Zone (“SEZ”). As part of developing India’s very own and first IFSC, both Indian and foreign entities are permitted to establish and operate IFSC Insurance Offices (“IIO”) from GIFT City, upon obtaining the requisite approvals. The IIOs have the advantage or the ability to transact in freely convertible foreign currencies in offshore markets, while being situated within the territorial borders of India. From 2015 to early 2020, the Insurance Regulatory and Development Authority of India (“IRDAI”) issued guidelines for IIOs (“IRDAI IIO Guidelines”). Thereafter, pursuant to the International Financial Services Centres Authority Act, 2019, the International Financial Services Centres Authority (“IFSCA”) was empowered on October 1, 2020 as the unified regulator with wide powers to develop and regulate financial products, financial services, and financial institutions in IFSCs, including IIOs.

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Policyholder Data Sharing in India

Introduction

With a vision to transform India into a digitally empowered society and knowledge economy, the Indian government[1] launched the Digital India initiative and mindful of its impact, it has been taking several steps to ensure greater accessibility as well as greater safety around internet based services. This, coupled with heightened internet based services and digital connectivity,[2] led the government to launch several digital services[3] and some are remarkably successful – these range from unified payments interface (UPIs) to DigiLocker[4]. According to India Brand Equity Foundation, the rising use of UPIs strongly indicate that more and more people in India are adopting a digital lifestyle[5] – UPI saw its highest ever number of transactions in April 2022 at 5.58 billon, amounting to INR 9.83 trillion. DigiLocker hit the mark of 101 million users on March 19, 2022, evidencing the adoption and success of this initiative[6].

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Liberalisation of FDI In Insurance Companies – A look at the step(s) taken since the Big Budget Announcement

The industry is now well versed with the move to liberalise foreign direct investment (“FDI”) in Indian insurance companies to 74%, from the existing cap of 49%. The announcement was first made by the Finance Minister Ms. Nirmala Sitharaman on February 1, 2021, as part of her Budget presentation. The move followed the raise in FDI limits to 100% in insurance intermediaries, which was announced by Ms. Sitharaman in July 2019 and effected in September 2019.
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Transfer of Shares of an Insurance Company - The much-needed clarifications

The Insurance Regulatory and Development Authority of India (“IRDAI”) issued a circular (“Circular”) on July 22, 2020 to all CMDs and CEO of insurance and re-insurance companies with a view to bring more clarity on issues relating to the transfer of shares of insurance companies and the creation of pledge over shares of insurance companies Set out below is a brief summary of the clarifications provided by the Circular in relation to transfer of shares of an insurance company:

 A. Clarification on IRDAI’s guidelines for transfer of shares of listed companies
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IRDAI’s Approach to ‘Fit and Proper’ Assessment in light of the Sahara Life Saga

Introduction

An issue of significant relevance to financial regulators world-over is the fitness and propriety of key shareholders of financial entities. The objective of this blog is to analyse IRDAI’s approach to assessment of ‘fit and proper’ status of significant owners of insurers, especially in light of the order passed by the IRDAI in the matter of M/s Sahara India Life Insurance Company Limited (“Sahara Life”) on December 30, 2020 (“IRDAI Order”). Before we delve into IRDAI’s approach in this regard, it is important to trace the chronology of events, leading to the IRDAI Order.
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