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Insurance Amendment Bill 2021

Topics Covered: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Insurance Amendment Bill, 2021:


Context:

The bill was recently passed by Rajya Sabha.

Key features of the Bill:

  • The Bill amends the Insurance Act, 1938 to increase the maximum foreign investment allowed in an Indian insurance company.
  • The Bill increases the limit on foreign investment in an Indian insurance company from 49% to 74%, and removes restrictions on ownership and control.
  • While control will go to foreign companies, the majority of directors and key management persons will be resident Indians who will be covered by law of the land.

Significance:

Insurance companies are facing liquidity pressure and the higher limit would help meet the growing capital requirement.

Background:

Foreign investment in the insurance sector was first permitted in the year 2000 up to 26%.

  • Subsequently, vide an Amendment Act of 2015, this limit was raised to 49% of the paid-up equity capital of such company, which is Indian owned and controlled.

InstaLinks:

Prelims Link:

  1. FDI in insurance sector.
  2. Recent amendments.
  3. About IRDAI.

Mains Link:

Discuss the issues associated with allowing 100% FDI in the insurance sector.

Sources: PIB.