As per the norms, life and general insurance companies with a minimum net worth of Rs500 crore and Rs250 crore, respectively, can apply for setting up of foreign business
The Insurance Regulatory and Development Authority (IRDA) has allowed insurers with sound financial health and a minimum of three years of operations to set up business in other countries.
Companies had been for long seeking permission from sector regulator to open foreign insurance companies, as well as branch offices abroad to exploit markets overseas.
IRDA has issued guidelines for Indian companies to set up life, general or reinsurance business abroad.
As per the norms, life and general insurance companies with a minimum net worth of Rs500 crore and Rs250 crore, respectively, can apply for setting up of foreign business.
In the case of reinsurance companies, the net worth should be Rs750 crore.
“The registered Indian insurance company should have been in operations for at least 3 years,” the guidelines said.
An insurer desirous of setting up foreign company or branch should have earned profits for the three years out of the past five years, it said.
Seeking to safeguard the interest of domestic policyholders, IRDA further said the insurer setting up overseas business will not be allowed to utilise the fund of domestic policyholders.
“The Indian insurance company shall have in place appropriate arrangements to ensure that the policyholder's liabilities that arise for foreign operations are adequately ring-fenced in order to protect the Indian policyholder,” the guidelines said.
There are 52 companies in life, general insurance and reinsurance business in India. Most of them have foreign partners.
An insurance company desirous of setting up foreign insurance company (including branch office) “should not suffer from any adverse report of the Authority on its track record of regulatory compliances, for three years out of the last five years from the date of application,” the IRDA added.
The guidelines also said the Indian insurers should formulate an “Investment Policy” to suit the scale, nature and area of operations of the foreign branch offices.
As per the IRDA, a “foreign insurance company means a company registered outside India whose paid-up capital is subscribed to by an Indian insurance company.
It shall include a foreign subsidiary company wherein the Indian insurance company has a holding of more than 50% of its paid-up capital or is in a position to control the composition of its board of directors. It shall also include a branch office of the Indian insurance company”, the IRDA added.
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