Captives dropped from Indian insurance reforms

The Indian government has ruled out allowing a captive insurance company regime as part of a package of insurance reforms.  

The reforms, which have been welcomed by the Indian domestic insurance industry, will allow the limit of foreign direct investment to 100% from 74%. 

The Hindu newspaper said the Department of Financial Services is seeking stakeholders’ comments by December 10 on proposed amendments to the insurance law including the provision of composite licences in industry, lowering the minimum paid up capital threshold and reducing the net-owned funds for Foreign Reinsurance Branches and Lloyds members. 

Insurance agents will also be allowed to tie up with more than one life, general and health insurance player. Currently, the insurance agents are allowed to tie-up with only one life, general and health insurance company. 

Shailaja Lall, Partner, Shardul Amarchand Mangaldas and Co, told The Hindu that the proposed changes to the Insurance Act 1938 are not old wine in new bottles. There are several new additions and a few deletions which are notable from the last draft of the Insurance Laws Amendment Bill circulated by the Department of Financial Services in 2022, where significant reforms were proposed, Lall added.

Certain reforms which were proposed previously such as allowing captive insurers, the proposal to permit insurers to distribute other financial products have been dropped from the current draft, Lall noted. 

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