Insurance companies with foreign investments must retain percentage of profit as general reserve: Nirmala Sitharman

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New Delhi: Rajya Sabha on March 18 approved a bill to raise the foreign investment limit in the insurance sector to 74% with Finance Minister Nirmala Sitharaman saying while control will go to foreign companies, the majority of directors on the board and key management persons will be resident Indians who will be covered by law of the land. Insurance companies with foreign investment will also be required to retain a specific percentage of the profit as general reserve to ensure that reserves are available for meeting policyholders’ claims regardless of a foreign investor’s financial condition, she added.

On change of definition of ‘control’ of the insurance company with the hike in FDI limit, she said control means right to appoint a majority of directors, control the management of policy decisions including by virtue of their shareholding or management right or shareholder agreements or voting agreements.

Indian insurance companies having foreign investments will be required to retain specific percentage of the profit as general reserve to ensure that reserves are available for meeting policyholders’ claims regardless of a foreign investor’s financial condition: Smt @nsitharaman pic.twitter.com/MgqIWGO1Nf

— NSitharamanOffice (@nsitharamanoffc) March 18, 2021

These conditions, she said, should remove doubts that higher FDI would bring colonialism.

Sitharaman said India received FDI worth Rs 26,000 crore in the insurance sector after 2015 when the foreign investment limit was raised to 49% from 24%.

The bill to hike the FDI limit in insurance, she said, was been brought after extensive consultations by sector regulator IRDAI.

The bill, which will now go to the Lok Sabha for approval, was passed by voice vote after opposition Congress and other parties staged a walkout in protest of the bill.

The bill seeks to increase the FDI limit in the insurance sector to 74%. The announcement regarding it was made by the minister while presenting the Union Budget on February 1.