FDI In Insurance | Structures Obviating The 49% Cap

In December last year, the Indian government raised the FDI limit in the insurance sector from 26% to 49%. This was done through the introduction of the Insurance Laws (Amendment) Act, 2015, the Indian Insurance Companies (Foreign Investment) Rules, 2015 ("Foreign Investment Rules") and by undertaking amendments to paragraph 6.2.18.7 of the Consolidated FDI Policy dated 12 May 2015.

Rule 3 of the Foreign Investment Rules restricts foreign shareholding (directly or indirectly) to a maximum of 49% (i.e., Indian owned), and Rule 4 further mandates that an Indian Insurance company be Indian controlled. In addition to the requirement of being Indian owned and controlled, Regulation 11 of the Insurance Regulatory and Development Authority (Registration of Indian Insurance Companies) Regulations, 2000 ("Registration Regulations") prescribes the computation methodology for calculating foreign shareholding in an Indian Insurance Company. It is interesting to note that this