Insurance (Amendment) Act 2021: A Complete Guide
Recently, the GOI (Government of India) has passed the Insurance Amendment Act 2021, on 25.03.2021, to amend the provisions of the Insurance Act 1938.
Further, the said amended act has received the presidential assent on 25.03.2021 and will come into effect from the date chosen for publication by the Central Government.
In this learning blog, we will discuss the objective and key provisions of the Insurance Amendment Act 2021.
Key objective of the Insurance Amendment Act 2021
The key objective of the act is to achieve the purpose of the Government’s FDI (Foreign Direct Investment) Policy by raising the threshold limit of the foreign investment in the Indian insurance companies from the prevailing 49 per cent to 74 per cent, and to permit the foreign ownership and control with the safeguards.
Read our article:How to Get Insurance Broker License in India
Key Provisions of the Amended Insurance Act
The key provisions of the amended Insurance Act can be summarised as:
Substitution of Section 2 Clause (7A) Sub Clause (b)
The existing section 2 clause (7A) sub clause (b) will be substituted with new provisions, which are as follows:
(b) in which the total aggregate holdings of the equity shares by the foreign investors comprising of portfolio investors do not exceed 74 per cent of the total paid-up equity capital of such an Indian Insurance Company and the foreign direct investment will be subject to the conditions & manner, as may be specified.
Amendment in Section 27
It shall be noted that in the provision of section 27 of the principal Act, i.e., the Insurance Act 1938, the explanation stated in sub-section (7) shall stand omitted.
Substitution of Section 114 Subsection (2) Clause (aaa)
It shall be noted that in the provision of section 114 subsection (2) clause (aaa) of the principal Act, i.e., Insurance Act 1938, shall be substituted with the new one, which is as follows:
(aaa) the conditions and the manner of the foreign direct investment under sub-clause (b) of clause (7A) of section 2.
In a nutshell, to accomplish the objective of the Government’s FDI Policy, the government has amended the provisions of the Insurance Act 1938 and has increased the limit of Foreign Investment in the Indian Insurance Companies from 49 to 74%. The said amended act will be in force from the date assigned by the government for publication in the Official Gazette.
Read our article:What Role Does IRDA Play in the Development of Insurance Sector?Insurance-Amendment-Act-2021