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THE INSURANCE LAWS (AMENDMENT) ACT, 2015
NO. 5 OF 2015
[20th March, 2015.]
An Act further to amend the Insurance Act, 1938 and the General Insurance Business (Nationalisation) Act, 1972 and to amend the Insurance Regulatory and Development Authority Act, 1999.
Be it enacted by Parliament in the Sixty-sixth Year of the Republic of India as follows:—
CHAPTER I
PRELIMINARY
Short title and commencement
1. (1) This Act may be called the Insurance Laws (Amendment) Act, 2015.
(2) It shall be deemed to have come into force on the 26th day of December, 2014.
CHAPTER II
AMENDMENTS TO THE INSURANCE ACT, 1938
Substitution of references to certain expressions by certain other expressions
2. In the Insurance Act, 1938 (hereafter in this Chapter referred to as the Insurance Act), throughout the Act,—
(a) for the words and figures "the Indian Companies Act,1913", wherever they occur, the words and figures "the Companies Act, 2013" shall be substituted;
(b) for the words and figures "the Companies Act,1956", wherever they occur, the words and figures "the Companies Act, 2013" shall be substituted.
Amendment of section 2.
3. In section 2 of the Insurance Act,—
(i) for clauses (1) and (1A), the following clauses shall be substituted, namely:—
'(1) "actuary" means an actuary as defined in clause (a) of sub-section (1) of section 2 of the Actuaries Act, 2006;
(1A) ''Authority'' means the Insurance Regulatory and Development Authority of India established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999;';
(ii) clause (5A) shall be omitted;
(iii) after clause (6B), the following clause shall be inserted, namely:—
'(6C) "health insurance business" means the effecting of contracts which provide for sickness benefits or medical, surgical or hospital expense benefits, whether in-patient or out-patient travel cover and personal accident cover;';
(iv) for clause (7A), the following clause shall be substituted, namely:—
'(7A) "Indian insurance company" means any insurer, being a company which is limited by shares, and,—
(a) which is formed and registered under the Companies Act, 2013 as a public company or is converted into such a company within one year of the commencement of the Insurance Laws (Amendment) Act, 2015;
(b) in which the aggregate holdings of equity shares by foreign investors, including portfolio investors, do not exceed forty-nine per cent of the paid up equity capital of such Indian insurance company, which is Indian owned and controlled, in such manner as may be prescribed.
Explanation.—For the purposes of this sub-clause, the expression"control" shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements;
(c) whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurance business;’;
(v) clause (8) shall be omitted;
(vi) in clause (8A),—
(I) for sub-clause (b), the following sub-clause shall be substituted, namely:—
"(b) having a minimum paid-up capital of rupees one hundred crore in case of life insurance business, general insurance business and health insurance business;";
(II) in sub-clause (d), after the words ''general insurance business'', the words ''or health insurance business'' shall be inserted;
(vii) for clause (9), the following clause shall be substituted, namely:—
'(9) "insurer" means—
(a) an Indian Insurance Company, or
(b) a statutory body established by an Act of Parliament to carry on insurance business, or
(c) an insurance co-operative society, or
(d) a foreign company engaged in re-insurance business through a branch established in India.
Explanation.—For the purposes of this sub-clause, the expression "foreign company" shall mean a company or body established or incorporated under a law of any country outside India and includes Lloyd's established under the Lloyd's Act, 1871 (United Kingdom) or any of its Members;';
(viii) in clause (10), the words and figures "licensed under section 42" shall be omitted;
(ix) in clause (11), in sub-clause (c), for the words "annuities payable out of any fund", the words "benefit payable out of any fund'' shall be substituted;
(x) clauses (12), (13) and (15) shall be omitted;
(xi) in clause (16), for the words, brackets, figures and letter "clauses (13) and (13A) of section 2 of the Indian Companies Act, 1913", the words, brackets and figures "clause (68) and clause (72) of section 2 of the Companies Act, 2013" shall be substituted;
(xii) after clause (16), the following clauses shall be inserted, namely:—
'(16A) "regulations" means the regulations framed by the Insurance Regulatory and Development Authority of India established under the Insurance Regulatory and Development Authority Act, 1999;
(16B) "re-insurance" means the insurance of part of one insurer's risk by another insurer who accepts the risk for a mutually acceptable premium;
(16C) ''Securities Appellate Tribunal'' means the Securities Appellate Tribunal established under section 15K of the Securities and Exchange Board of India Act, 1992;';
(xiii) clause (17) shall be omitted.
Insertion of new section 2CB.
Properties in India not to be insured with foreign insurers except with the permission of Authority.
4. After section 2CA of the Insurance Act, the following section shall be inserted, namely:—
"2CB. (1) No person shall take out or renew any policy of insurance in respect of any property in India or any ship or other vessel or aircraft registered in India with an insurer whose principal place of business is outside India save with the prior permission of the Authority.
(2) If any person contravenes the provision of sub-section (1), he shall be liable to a penalty which may extend to five crore rupees.".
Omission of section 2E.
Amendment of section 3.
5. Section 2E of the Insurance Act shall be omitted.
6. In section 3 of the Insurance Act,—
(i) for sub-section (2), the following sub-section shall be substituted, namely:—
“(2) Every application for registration shall be made in such manner and shall be accompanied by such documents as may be specified by the regulations.";
(ii) in sub-section (2A), in clause (d), for the figures, letter and word "5, 31A and 32", the figures, word and letter "5 and 31A" shall be substituted;
(iii) for sub-section (2C), the following sub-section shall be substituted, namely:—
"(2C) Any person aggrieved by the decision of the Authority refusing registration may, within thirty days from the date on which a copy of the decision is received by him, appeal to the Securities Appellate Tribunal.";
(iv) sub-section (2D) shall be omitted;
(v) for sub-sections (3), (4), (5) and (5A), the following sub-sections shall be substituted, namely:—
"(3) In the case of any insurer having joint venture with a person having its principal place of business domiciled outside India or any insurer as defined in sub-clause (d) of clause (9) of section 2, the Authority may withhold registration already made if it is satisfied that in the country in which such person has been debarred by law or practice of that country to carry on insurance business.
(4) The Authority may suspend or cancel the registration of an insurer either wholly or in so far as it relates to a particular class of insurance business, as the case may be,—
(a) if the insurer fails, at any time, to comply with the provisions of section 64VA as to the excess of the value of his assets over the amount of his liabilities, or
(b) if the insurer is in liquidation or is adjudged as an insolvent, or
(c) if the business or a class of the business of the insurer has been transferred to any person or has been transferred to or amalgamated with the business of any other insurer without the approval of the Authority, or
(d) if the insurer makes default in complying with, or acts in contravention of, any requirement of this Act or of any rule or any regulation or order made or, any direction issued thereunder, or
(e) if the Authority has reason to believe that any claim upon the insurer arising in India under any policy of insurance remains unpaid for three months after final judgment in regular court of law, or
(f) if the insurer carries on any business other than insurance business or any prescribed business, or
(g) if the insurer makes a default in complying with any direction issued or order made, as the case may be, by the Authority under the Insurance Regulatory and Development Authority Act, 1999, or
(h) if the insurer makes a default in complying with, or acts in contravention of, any requirement of the Companies Act, 2013 or the General Insurance Business (Nationalisation) Act, 1972 or the Foreign Exchange Management Act, 1999 or the Prevention of Money Laundering Act, 2002,
or
(i) if the insurer fails to pay the annual fee required under section 3A, or
(j) if the insurer is convicted for an offence under any law for the time being in force, or
(k) if the insurer being a co-operative society set up under the relevant State laws or, as the case may be, the Multi-State Co-operative Societies Act, 2002, contravenes the provisions of law as may be applicable to the insurer.
(5) When the Authority suspends or cancels any registration under clause (a), clause (d), clause (e), clause (f), clause (g) or clause (i) of sub-section (4), it shall give notice in writing to the insurer of its decision, and the decision shall take effect on such date as it may specify in that behalf in the notice, such date not being less than one month not more than two months from the date of the receipt of the notice in the ordinary course of transmission.
(5A) When the Authority suspends or cancels any registration under clause (b), (c), (j) or (k) of sub-section (4), the suspension or cancellation, as the case may be, shall take effect on the date on which notice of the order of suspension or cancellation is served on the insurer.";
(vi) for sub-section (5C), the following sub-section shall be substituted, namely:—
"(5C) Where a registration is suspended or cancelled under clause (a), clause (d), clause (e), clause (f), clause (g) or clause (i) of sub-section (4), the Authority may at its discretion revive the registration, if the insurer within six months from the date on which the suspension or cancellation took effect complies with the provisions of section 64VA as to the excess of the value of his assets over the amount of his liabilities or has had an application under subsection (4) of section 3A accepted, or satisfies the Authority that no claim upon him such as is referred to in clause (e) of sub-section (4) remains unpaid or that he has complied with any requirement of this Act or the Insurance Regulatory and Development Authority Act, 1999, or of any rule or any regulation, or any order made thereunder or any direction issued under those Acts, or that he has ceased to carry on any business other than insurance business or any prescribed business, as the case may be, and complies with any directions which may be given to him by the Authority.".
Substitution of new section for section 3A.
7. For section 3A of the Insurance Act, the following section shall be substituted, namely:—
Payment of annual fee by insurer.
"3A. (1) An insurer who has been granted a certificate of registration under section 3 shall pay such annual fee to the Authority in such manner as may be specified by the regulations.
(2) Any failure to deposit the annual fee shall render the certificate of registration liable to be cancelled.".
Substitution of new section for section 4.
8. For section 4 of the Insurance Act, the following section shall be substituted, namely:—
Minimum limits for annuities and other benefits secured by policies of life insurance.
"4. The insurer shall pay or undertake to pay on any policy of life insurance or a group policy issued, a minimum annuity and other benefits as may be determined by regulations excluding any profit or bonus provided that this shall not prevent an insurer from converting any policy into a paid-up policy of any value or payment of surrender value of any amount.".
Amendment of section 5.
9. In section 5 of the Insurance Act,—
(i) in sub-section (1), both the provisos shall be omitted;
(ii) sub-section (3) shall be omitted.
Substitution of new section for section 6.
10. For section 6 of the Insurance Act, the following section shall be substituted, namely:—
Requirement as to capital.
"6. (1) No insurer not being an insurer as defined in sub-clause (d) of clause (9) of section 2, carrying on the business of life insurance, general insurance, health insurance or re-insurance in India or after the commencement of the Insurance
Regulatory and Development Authority Act, 1999, shall be registered unless he has,—
(i) a paid-up equity capital of rupees one hundred crore, in case of a person carrying on the business of life insurance or general insurance; or
(ii) a paid-up equity capital of rupees one hundred crore, in case of a person carrying on exclusively the business of health insurance; or
(iii) a paid-up equity capital of rupees two hundred crore, in case of a person carrying on exclusively the business as a re-insurer:
Provided that the insurer, may enhance the paid-up equity capital, as provided in this section in accordance with the provisions of the Companies Act, 2013, the Securities and Exchange Board of India Act, 1992 and the rules, regulations or directions issued thereunder or any other law for the time being in force:
Provided further that in determining the paid-up equity capital, any preliminary expenses incurred in the formation and registration of any insurer as may be specified by the regulations made under this Act, shall be excluded.
(2) No insurer, as defined in sub-clause (d) of clause (9) of section 2, shall be registered unless he has net owned funds of not less than rupees five thousand crore.".
Amendment of section 6A
11. In section 6A of the Insurance Act,—
(i) for sub-section (1), the following sub-section shall be substituted, namely:—
"(1) No public company limited by shares having its registered office in India, shall carry on life insurance business or general insurance business or health insurance business or re-insurance business, unless it satisfies the following conditions, namely:—
(i) that the capital of the company shall consist of equity shares each having a single face value and such other form of capital, as may be specified by the regulations;
(ii) that the voting rights of shareholders are restricted to equity shares;
(iii) that, except during any period not exceeding one year allowed by the company for payment of calls on shares, the paid-up amount is the same for all shares, whether existing or new:
Provided that the conditions specified in this sub-section shall not apply to a public company which has, before the commencement of the Insurance (Amendment) Act, 1950, issued any shares other than ordinary shares each of which has a single face value or any shares, the paid-up amount whereof is not the same for all of them for a period of three years from such commencement.";
(ii) in sub-section (2), after the words "paid-up amount of the", the word "equity" shall be inserted;
(iii) for sub-section (4), the following sub-section shall be substituted, namely:—
"(4) A public company as aforesaid which carries on life insurance business, general and health insurance business and re-insurance business—
(a) shall, in addition to the register of members maintained under the Companies Act, 2013, maintain a register of shares in which the name, occupation and address of the beneficial owner of each share shall be entered including any change of beneficial owner declared to it within fourteen days from the receipt of such declaration;
(b) shall not register any transfer of its shares—
(i) unless, in addition to compliance being made with the provisions of section 56 of the Companies Act, 2013, the transferee furnishes a declaration in the prescribed form as to whether he proposes to hold the shares for his own benefit or as a nominee, whether jointly or severally, on behalf of others and in the latter case giving the name, occupation and address of the beneficial owner or owners, and the extent of the beneficial interest of each;
(ii) where, after the transfer, the total paid-up holding of the transferee in the shares of the company is likely to exceed five per cent. of its paid-up capital unless the previous approval of the Authority has been obtained to the transfer;
(iii) where, the nominal value of the shares intended to be transferred by any individual, firm, group, constituents of a group, or body corporate under the same management, jointly or severally exceeds one per cent. of the paid-up equity capital of the insurer, unless the previous approval of the Authority has been obtained for the transfer.
Explanation.—For the purposes of this sub-clause, the expressions "group" and "same management" shall have the meanings respectively assigned to them in the Competition Act, 2002.";
(iv) sub-sections (3), (6), (7), (8), (9) and (10) shall be omitted;
(v) in sub-section (11),—
(a) in the opening portion, the words, brackets and figures "except those of sub-sections (7), (8) and (9)" shall be omitted;
(b) in clause (i), the word “and” shall be omitted;
(c) clause (ii) shall be omitted;
(d) in the Explanation 1, in clause (ii), in sub-clause (c), the words "managing agent" shall be omitted.
Omission of section 6AA.
12. Section 6AA of the Insurance Act shall be omitted.
Amendment of section 6B
13. In section 6B of the Insurance Act,—
(i) in sub-section (1),—
(a) for the words "life insurance business", the words "life or general or health insurance or re-insurance business" shall be substituted; and
(b) for the words "Central Government", the word "Authority" shall be substituted;
(ii) in sub-sections (2) and (3), for the words "High Court", the words "the Securities Appellate Tribunal" shall be substituted;".
(iii) sub-section (4) shall be omitted.
Omission of sections 6C, 7, 8 and 9.
14. Sections 6C, 7, 8 and 9 of the Insurance Act shall be omitted.
Amendment of section 10
15. In section 10 of the Insurance Act,—
(i) in sub-section (1), for the words "prescribed in this behalf", the words "specified by the regulations" shall be substituted;
(ii) in sub-section (2),—
(a) the words, brackets and figures, "after the expiry of six months from the commencement of the Insurance (Amendment) Act, 1946", shall be omitted;
(b) the words "under the law of the insurer's country" occurring at the end, shall be omitted.
(iii) after sub-section (2A), the following sub-section shall be inserted, namely:—
"(2AA) Where the insurer carries on the business of insurance, all receipts due in respect of each sub-class of such insurance business shall be carried to and shall form a separate fund, the assets of which shall be kept separate and distinct from other assets of the insurer and every insurer shall submit to the Authority the necessary details of such funds as may be required by the Authority from time to time and such funds shall not be applied directly or indirectly, save as expressly permitted under this Act or regulations made thereunder.".
Substitution of new section for section 11
16. For section 11 of the Insurance Act, the following section shall be substituted, namely:—
"11. (1) Every insurer, on or after the date of the commencement of the Insurance Laws (Amendment) Act, 2015, in respect of insurance business transacted by him and in respect of his shareholders' funds, shall, at the expiration of each financial year, prepare with reference to that year, balance sheet, a profit and loss account, a separate account of receipts and payments, a revenue account in accordance with the regulations as may be specified.
(2) Every insurer shall keep separate accounts relating to funds of shareholders and policyholders.
(3) Unless the insurer is a company as defined in clause (20) of section 2 of the Companies Act, 2013, the accounts and statements referred to in sub-section (1) shall be signed by the insurer, or in the case of a company by the chairman, if any, and two directors and the principal officer of the company, or in case of an insurance cooperative society by the person in charge of the society and shall be accompanied by a statement containing the names, descriptions and occupations of, and the directorships held by, the persons in charge of the management of the business during the period to which such accounts and statements refer and by a report on the affairs of the business during that period.".
Substitution of new section for section 12.
17. For section 12 of the Insurance Act, the following section shall be substituted, namely:—
Audit
"12. The balance sheet, profit and loss account, revenue account and profit and loss appropriation account of every insurer, in respect of all insurance business transacted by him, shall, unless they are subject to audit under the Companies Act, 2013, be audited annually by an auditor, and the auditor shall in the audit of all such accounts have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies by section 147 of the Companies Act, 2013.".
Amendment of section 13
18. In section 13 of the Insurance Act,—
(i) for sub-section (1), the following sub-section shall be substituted, namely:—
"(1) Every insurer carrying on life insurance business shall, once at least every year cause an investigation to be made by an actuary into the financial condition of the life insurance business carried on by him, including a valuation of his liabilities in respect thereto and shall cause an abstract of the report of such actuary to be made in accordance with the regulations:
Provided that the Authority may, having regard to the circumstances of any particular insurer, allow him to have the investigation made as at a date not later than two years from the date as at which the previous investigation was made:
Provided further that every insurer, on or after the commencement of the Insurance Regulatory and Development Authority Act, 1999, shall cause an abstract of the report of the actuary to be made in such manner as may be specified by the regulations.";
(ii) for sub-section (4), the following sub-section shall be substituted, namely:—
"(4) There shall be appended to every such abstract a statement prepared in such form and in such manner as may be specified by the regulations:
Provided that, if the investigation referred to in sub-sections (1) and (2) is made annually by any insurer, the statement need not be appended every year
but shall be appended at least once in every three years.";
(iii) for sub-section (6), the following sub-section shall be substituted, namely:—
'(6) The provisions of this section relating to the life insurance business shall apply also to any such sub-class of insurance business included in the class "Miscellaneous Insurance" and the Authority may authorise such modifications and variations of regulations as may be necessary to facilitate their application to any such sub-class of insurance business:
Provided that, if the Authority is satisfied that the number and amount of the transactions carried out by an insurer in any such sub-class of insurance business is so small as to render periodic investigation and valuation unnecessary, it may exempt that insurer from the operation of this sub-section in respect of that sub-class of insurance business.'.
Substitution of new section for section 14
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