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President signs insurance ordinance

India Blooms News Service | | Dec 28, 2014, at 12:25 am

#President signs insurance ordinance

New Delhi, Dec 27 (IBNS): President Pranab Mukherjee has signed the ordinance to raise the cap of Foreign Direct Investment (FDI) in the insurance sector.

The proposed step is for furtherance of the broad objective of deepening the reform process in the economy in general and the Insurance sector in particular, a government statement said on Saturday.

The Union Cabinet had earlier approved the promulgation of the Insurance Laws (Amendment) Ordinance 2014 to amend the Insurance Act, 1938, the General Insurance Business (Nationalisation) Act, 1972 and the Insurance Regulatory and Development Authority Act, 1999, in accordance with the Insurance Laws (Amendment) Bill 2008 as reported by the Select Committee of the Rajya Sabha, and for suitably introducing it in the Parliament in the next session for consideration and passing.

"The Ordinance is aimed at amending the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority Act, 1999 to remove archaic and redundant provisions in the Insurance Laws, empower IRDA to enable more effective regulation and enhance the foreign equity investment cap in an Indian Insurance Company from 26 to 49% with the safeguard of Indian ownership and control," the Ministry of Finance said in a statement.

Towards these ends, the content of the ordinance is aimed also at allowing insurance companies to raise capital through new and innovative instruments, which would help capital intensive insurance industry to garner resources for business growth.

The ordinance will also enable empowering IRDA to regulate key aspects of Insurance Company operations in areas like solvency, investments, expenses and commissions, which is in keeping with global best practices of regulation.

"The absence of such empowerment for IRDA potentially undermines faith in our regulatory framework and discourages investment in the sector," the ministry's statement said.

The ordinance will also substantially enhance penalty provisions to ensure compliance with Insurance Laws by companies, which is essential to uphold the consumer interest.

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