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India in focus

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Ash Tiwari

Counsel

London

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Jarvis Philip
Philip Jarvis

Partner

London

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McInerney Kate
Kate McInerney

Partner

London

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11 October 2021

Earlier this year, the Insurance (Amendment) Act 2021 (the Act) came into force in India, allowing non-Indian investors to hold majority control in Indian insurance companies for the first time (subject to certain conditions). 

Foreign ownership of up to 74% in an Indian insurance company is now permitted via the ‘automatic route’ – ie without prior approval from the Indian government (subject to verification by the Insurance Regulatory and Development Authority of India (IRDAI)). The requirement that Indian insurance companies must be “Indian owned and controlled” has also been removed.

The Act signals the continuing liberalisation of the Indian insurance sector and follows the legislative change in 2015 when the cap on foreign ownership in Indian insurance companies was increased from 26% to 49%.

Since 2015, the sector has seen a significant rise in foreign investment, including an influx of private equity funds interested in growing their presence in the Indian insurance market.

It is expected that the liberalisation of foreign investment in the Indian insurance sector brought about by the Act will lead to similar increased inflows of foreign capital, as well as stimulate growth and innovation in the Indian insurance sector. International investors who were previously reluctant to invest in Indian insurance companies because of being unable to exercise “control” (owing to both the 49% cap and the requirement of “Indian ownership and control”) are revisiting potential investment opportunities.

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