The Insurance (Amendment) Bill, 2021 |The LexSphere Library

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•THE INSURANCE (AMENDMENT) BILL, 2021

•A

•BILL

•further to amend the Insurance Act, 1938.

•BE it enacted by Parliament in the Seventy-second Year of the Republic of India as

•follows:—

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2.In order to achieve the objective of Government's Foreign Direct Investment Policy

•of supplementing domestic long-term capital, technology and skills for the growth of the

•economy and the insurance sector, and thereby enhance insurance penetration and social

•protection, it has been decided to raise the limit of foreign investment in Indian insurance

•companies from the existing 49 per cent. to 74 per cent.

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3.Accordingly, the Insurance (Amendment) Bill, 2021, amending the Insurance

•Act, 1938, seeks, inter alia, to provide for—

(i)substitution of sub-clause (b) in the definition of "Indian insurance company"

•in clause (7A) of section 2 of the Insurance Act, 1938, so as to raise the limit of foreign

•investment in an Indian insurance company from the existing 49 per cent. to 74 per cent.

•and to allow foreign ownership and control with safeguards;

•(ii) omission of the Explanation to sub-section (7) of section 27.

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4.The Bill seeks to achieve the above objectives.

•N

•EW DELHI; NIRMALA SITHARAMAN.

•The 12th March, 2021.

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•MEMORANDUM REGARDING DELEGATED LEGISLA TION

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•Clause 4 of the Bill seeks to amend section 114 of the Insurance Act, 1938, which

•provides that the Central Government make rules for the conditions and manner of foreign

•investment under sub-clause (b) of clause (7A) of section 2.

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2.The matter in respect of which the aforementioned rules may be made are matters of

•procedure and administrative details, and as such, it is not practicable to provide for them in

•the proposed Bill itself. The delegation of legislative power is, therefore, of a normal character.

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•ANNEXURE

•EXTRACTS FROM THE INSURANCE ACT, 1938

•(4 OF 1938)

•* * * * *

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2.In this Act, unless there is anything repugnant in the subject or context,—

•* * * * *

•(7A) "Indian insurance company" means any insurer, being a company which is

•limited by shares, and,—

•* * * * *

(b)in which the aggregate holdings of equity shares by foreign investors,

•including portfolio investors, do not exceed forty-nine per cent. of the paid up

•equity capital of such Indian insurance company, which is Indian owned and

•controlled, in such manner as may be prescribed.

Explanation.—For the purposes of this sub-clause, the expression

•"control" shall include the right to appoint a majority of the directors or to

•control the management or policy decisions including by virtue of their

•shareholding or management rights or shareholders agreements or voting

•agreements;

•* * * * *

•I

•NVESTMENT, LOANS AND MANAGEMENT

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27.(1)* * * * *

(7)The assets required by this section to be held invested by an insurer incorporated

•or domiciled outside India shall, except to the extent of any part thereof which consists of

•foreign assets held outside India, be held in India and all such assets shall be held in trust

•for the discharge of the liabilities of the nature referred to in sub-section ( 1) and shall be

•vested in trustees resident in India and approved by the Authority, and the instrument of

•trust under this sub-section shall be executed by the insurer with the approval of the

•Authority and shall define the manner in which alone the subject-matter of the trust shall be

•dealt with.

Explanation.—This sub-section shall apply to an insurer incorporated in India whose

•share capital to the extent of one-third is owned by, or the members of whose governing

•body to the extent of one-third consists of members domiciled elsewhere than in India.

•* * * * *

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114.(1)* * * * *

(2)In particular and without prejudice to the generality of the foregoing power, such

•rules may prescribe—

•* * * * *

•(aaa) the manner of ownership and control of Indian insurance company under

•sub-clause (b) of clause (7A) of section 2;

•* * * * *

Definitions.

•Investment of

assets.

•Power of

•Central

•Government

•to make rules.

•RAJYA SABHA

•————

•A

•BILL

•further to amend the Insurance Act, 1938.

•————

•(Smt. Nirmala Sitharaman, Minister of Finance and Corporate Affairs)

•MGIPMRND—1606RS(S3)—12-03-2021.

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1.(1) This Act may be called the Insurance (Amendment) Act, 2021.

(2)It shall come into force on such date as the Central Government may, by notification

•in the Official Gazette, appoint.

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2.In the Insurance Act, 1938 (hereinafter referred to as the principal Act), in section 2,

•in clause (7A), for sub-clause (b), the following sub-clause shall be substituted, namely:—

•"(b) in which the aggregate holdings of equity shares by foreign investors

•including portfolio investors, do not exceed seventy-four per cent. of the paid-up

•equity capital of such Indian insurance company, and the foreign investment in which

•shall be subject to such conditions and manner, as may be prescribed;".

•Amendment of

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•section 2.

•Short title and

commencement.

•4 of 1938.

•Bill No. XX of 2021

•AS INTRODUCED IN THE RAJYA SABHA

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3.In section 27 of the principal Act, in sub-section ( 7), the Explanation shall be

omitted.

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4.In section 114 of the principal Act, in sub-section (2), for clause (aaa), the following

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•clause shall be substituted, namely:—

•"(aaa) the conditions and manner of foreign investment under sub-clause (b) of

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•clause (7A) of section 2;".

•Amendment

•of section 27.

•Amendment of

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•section 114.

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•STATEMENT OF OBJECTS AND REASONS

•The Insurance Act, 1938 was enacted to consolidate and amend the law relating to

•business of insurance in the country. The foreign investment in insurance sector was

•permitted in the year 2000 by allowing the same up to 26 per cent. in an Indian insurance

company.Subsequently, vide the Insurance Laws (Amendment) Act, 2015, this limit of

•foreign investment was raised to 49 per cent. of the paid-up equity capital of such company,

•which is Indian owned and controlled as per the rules made in this behalf.