Foreign Exchange Management (Insurance)
Regulations, 2015
[RBI Circular No. 18
dated 17th November 2016]
Attention of Authorised
Dealers (ADs) is invited to A.D (M.A. Series) Circular No. 11 dated May 16,
2000 in terms of which ADs were advised of various Rules, Regulations,
Notifications/ Directions issued under the Foreign Exchange Management Act,
1999 (hereinafter referred to as the Act). On a review, it is felt necessary to
revise the regulations issued under the Foreign Exchange Management (Insurance)
Regulations, 2000 notified vide Notification No. FEMA. 12/2000 - RB dated May
03, 2000 c.f. G.S.R. No. 395(E) dated May 03, 2000. Accordingly, the said
Regulations have been repealed in consultation with the Government of India and
superseded by the Foreign Exchange Management (Insurance) Regulations, 2015
notified vide Notification No. FEMA. 12(R)/2015-RB dated December 29, 2015 c.f.
G.S.R. No. 1007(E) dated December 29, 2015. The revised notification has come
into force with effect from December 29, 2015.
2. The Memorandum of Foreign Exchange Management
Regulations relating to General/Health Insurance (GIM) and Life Insurance (LIM)
in India have also been suitably modified and are annexed at Annex I and Annex
II, respectively.
3. AD Category I banks
may bring the contents of the circular to the notice of their constituents and
customers concerned.
4. The Master Direction No. 9 dated January
01, 2016 on Insurance, is being updated to reflect the changes.
5. The Directions contained in this circular have
been issued under Section 10(4) and 11(1) of the Foreign Exchange Management
Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if
any, required under any other law.
Annex
I
Major
changes effected in the revised General/ Health Insurance Manual (GIM)
|
Sl. No. |
Subject matter |
Changes |
|
1. |
Policies allowed to be
placed in foreign exchange. |
All general/health
insurance policies permitted by IRDAI are allowed to be placed in foreign
exchange. No RBI permission is required for issuance/renewal of any insurance
policy. |
|
2. |
Payment of insurance
premium by Indian Resident |
Payment of insurance
premium in foreign currency by Indian Resident is no longer required
irrespective of currency for settlement of claim. |
|
3. |
Payment of insurance
premium by Resident outside India |
Resident outside India
may obtain general/health insurance policy on payment of insurance premium in
foreign currency irrespective of currency for settlement of claim. However,
if the premium is paid in INR, settlement of claim will be in INR. |
|
4. |
Health insurance
policy by resident going abroad. |
i.
Resident going abroad for employment purpose may
also take health insurance policy on payment of premium in INR. ii.
Claims settlement under cashless international
health insurance policies to hospitals providing treatment or through Third
Party Administrator arrangements allowed. |
|
5. |
Investments abroad |
Overseas investment by
Insurance companies enabled. |
|
6. |
Quarterly report by
insurance companies on settlement of claims of policies issued with
permission of RBI. |
Quarterly Report
discontinued. |
GIM
Memorandum of Foreign
Exchange Management Regulations Relating to General /Health Insurance in India
1. Definitions
i.
"Person resident in India" and
"Foreign Currency" will have the same meaning as defined under
Foreign Exchange Management Act, 1999.
ii.
“Insurers” means the Indian Insurance Companies as
defined in Section 3(9) of The Insurance Laws (Amendment) Act, 2015 and
registered with Insurance Regulatory and Development Authority of India (IRDAI)
to carry out general/health insurance/reinsurance business in India.
2. Payment of insurance
premium in foreign exchange.
Payment of premium in
foreign exchange means and includes payment of premium in foreign exchange
and/or payment of premium in INR derived by sale of foreign exchange to an
authorised dealer or an authorised money-changer. Appropriate documentary
evidence may be insisted upon at the time of accepting payment.
3. General/ Health
Insurance policies from Insurers outside India.
i.
A person resident in India may take or continue to
hold a health insurance policy issued by an insurer outside India provided
aggregate remittance including amount of premium does not exceed the limits
prescribed by RBI under the Liberalised Remittance Scheme (LRS) from time to
time.
ii.
Units located in SEZs may take or continue to hold
general/health insurance policies from insurers outside India subject to IRDAI
Guidelines and Central Government rules provided the premium is paid by the
units out of their foreign exchange balances.
iii.
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 without permission of Insurance Regulatory and Development
Authority of India (IRDAI).
iv.
A person resident in India may take or continue to
hold a general /health insurance policy other than the ones referred in (i) to (iii) above, issued by an insurer outside India,
provided that, the policy is held, under a specific or general permission of
the Central Government.
v.
A person resident in India may continue to hold any
general/health insurance policy issued by an insurer outside India when such
person was resident outside India. In case the premium due on a general/health
insurance policy has been paid by making remittance from India, the policy
holder shall repatriate to India through normal banking channels, the maturity
proceeds or amount of any claim due on the policy, if any, within a period of
seven days from the receipt thereof.
4. All risk insurance
policies
Insurance on Indian
marine hulls covering All Risks against war and other allied risks (arising out
of civil commotion, political or labour disturbances etc.) is required to be
obtained only from the Insurers in India.
5. General/ Health
Insurance policies by Indian Residents
Resident of India may
take general/health insurance policy permitted by IRDAI from Indian insurer on
payment of premium in INR, where claims arising under the policies outside
India are to be settled in foreign currency.
6. General/Health
Insurance policies by Residents outside India.
Resident outside India
may take general/health insurance policy as permitted by IRDAI from Indian
Insurers. Claims arising under the policies are to be settled in INR if payment
of premium is in INR and in any currency if payment of premium is in foreign currency.
However, Insurance cover on risks inside India (including All Risks Insurance)
on assets in India owned by Indian branches/offices of foreign companies,
banks, etc., may be issued only in INR.
7. Transaction in Nepal
and Bhutan
Indians, Nepalese and
Bhutanese resident in Nepal and Bhutan as well as offices and branches of
Indian, Nepalese and Bhutanese firms, companies or other organizations in these
two countries are treated as resident in India for purpose of transactions in
INR. Payment of claims to such persons against general/health insurance
policies may be freely made in INR. Payments in foreign currency towards claims
under general/health insurance policies will require prior approval of Reserve
Bank, except where premium thereon was also collected in foreign currency.
8. Settlement of claims
in foreign currency
A.D. Banks may allow
foreign currency remittance for claims under IRDAI permitted general/ health
insurance policies issued by Indian insurers where settlement of claims is
assured in foreign currency subject to following conditions.
i) The claim has been
admitted by the competent authority of the insurer;
ii) The claim has been
settled as per the surveyor’s report wherever applicable, and other
substantiating documents;
iii) Claims on account
of reinsurance are being lodged with the reinsurers and will be received as per
reinsurance agreement;
iv) The remittance is being
made under the policy to the beneficiary who is resident outside India. For
resident beneficiaries the claim may be settled in INR equivalent of foreign
currency due. Under no circumstances payment in foreign currency be made to a
resident beneficiary;
v) In case of settlement
of claims of import into India, Insurance company is satisfied that:-
(a) Remittance in
foreign exchange is not already made by Importer and
(b) If Import is made
against Import Licence, the amount of insurance policy premium is endorsed on
the import licence;
vi) In case of settlement of insurance
claims of export from India, Insurance company is satisfied that the payment is
received in foreign exchange by the Indian exporter;
vii) In case of
settlement of insurance claims in respect of assets located outside India owned
by residents of India, permission of Reserve Bank of India for holding the
property had been obtained, (wherever necessary);
viii) Claims arising
outside India against policies issued under Employers’ Liability Act and
Merchant Shipping Act may be paid in appropriate foreign currency. Remittances
will be allowed for meeting specific claims on application by the Insurers
furnishing full details of the claims;
ix) In case of cashless
international health insurance products remittances may be allowed to the
hospital which has provided the treatment/Third Party Administrator with which
the insurer or the hospital has entered into a contractual arrangement in
accordance with applicable IRDAI regulations or to the insured person resident
outside India.
Note:
(a) Where original
documents are not available for any reason, photo copies may be accepted with
reasons for non-availability of the original documents. This provision does not
apply to remittances for replenishment of foreign currency balances which will
require specific approval of Reserve Bank of India.
(b) Claims may be
settled in INR in favour of Indian exporters even in cases where title to the
goods has passed to foreign buyer, if a request to that effect has been made by
the claimant resident outside India. A certificate indicating full particulars
of the transaction including number of relative EDF form (wherever applicable)
and amount paid in settlement of claim should be issued to the exporter to
enable the latter to obtain necessary approval from Reserve Bank for making
replacement shipments;
(c) Authorised dealers
have been permitted to open revolving letters of credit in favour of
established claims-settling agents abroad and reimburse claims under the credit
on verification of the necessary documentary evidence viz. statement of claim,
survey report or other documentary evidence of loss/damage, original policy or
certificate of insurance etc.
9. Re-Insurance
Reinsurance arrangements
of the insurers registered with IRDAI are to be decided by the companies
themselves on an annual basis, which is to be approved by the respective
insurer's Board in compliance with IRDAI Regulations. Authorised dealer,
designated by these insurers may allow remittances falling due under such
approved reinsurance arrangements by the insurers in accordance with the terms
and conditions laid down by their Boards.
10. Remittance of
Reinsurance Premium by IRDAI licensed brokers
Wherever IRDAI licensed
brokers arrange the reinsurance on behalf of insurers, brokers may remit the
premium through the branch of the authorised dealer designated by the insurer
in terms of para 9 above subject to the production of undernoted documents:
i) Relative debit notes
from overseas insurance company and/or Broker.
ii) Detailed statement
of premium settled by the individual insurer, along with a certificate to the
effect that the amount of reinsurance business is within the overall limit
approved by the insurer's Board and that the risks covered under the
reinsurance arrangements are within the scope of the Reinsurance Programme,
approved by the insurer's Board in compliance with IRDAI Regulations.
iii) A certificate from
the Chartered Accountant of the broker, prepared on the basis of certificates
and statements obtained from the insurers, to the effect that the proposed
remittance of reinsurance premium sought, is in agreement with the various
statements/certificates obtained from the insurer/s.
iv) Copy of approval letter from
IRDAI for placing business outside India by direct insurance brokers.
11. Foreign Currency
Accounts Abroad
Insurers may open, hold
and maintain with a bank outside India foreign currency accounts for
facilitating transactions and expenses relating/incidental to general/health
insurance / reinsurance business undertaken in foreign countries in accordance
with regulations laid down. Insurers should endeavour to keep in their foreign
currency accounts only the minimum balances required for normal business and
transfer to India regularly all surplus funds held at foreign centres.
12. Investments Abroad
General/health insurers
may invest freely, out of their funds abroad, without prior approval of Reserve
Bank of India subject to the following conditions:
(i)
Statutory requirement of host country concerned; and,
(ii) IRDAI guidelines,
if any, and in accordance with applicable FEMA regulations relating to
investment abroad.
Annex
II
LIM
Memorandum of Foreign
Exchange Management Regulations Relating to Life Insurance in India
A. Definitions
i.
"Person resident in India", "Person
resident outside India" and "foreign currency" will have the
same meaning as defined under Foreign Exchange Management Act, 1999 (42 of
1999).
ii.
"Person of Indian Origin" will have the
same meaning as defined in Notification FEMA 5(R)/2016-RB dated April 1, 2016.
iii.
‘Not permanently resident' means a person resident
in India for employment of a specified duration (irrespective of length
thereof) or for a specific job or assignment, the duration of which does not
exceed three years.
iv.
“Insurer in India” means Life insurers registered
with Insurance Regulatory and Development Authority of India (IRDAI) to carry
out Life insurance business in India.
B. Life insurance policy
from insurer outside India by Residents
i.
A person resident in India may take or continue to
hold a life insurance policy issued by an insurer outside India, provided that
the policy is held under a specific or general permission of the Reserve Bank
of India.
ii.
A person resident in India may continue to hold any
life insurance policy issued by an insurer outside India when such person was
resident outside India. If the premium due on a life insurance policy has been
paid by making remittance from India, the policy holder shall repatriate to
India through normal banking channels, the maturity proceeds or amount of any
claim due on the policy, within a period of seven days from the receipt
thereof.
C. Life insurance
policies by insurer in India.
1. Issuance of policies
and collection of premium.
a) Residents
(i)
Policies may be issued in foreign currency to resident persons of Indian
nationality or origin who have returned to India after being resident outside
India, provided the premium are paid out of remittances from foreign currency
funds held by them abroad or from their Resident Foreign Currency (RFC) account
with authorised dealers in India.
(ii) Policies
denominated in foreign currency or rupees may be issued to foreign nationals
not permanently resident in India provided the premium is paid out of foreign
currency funds or from their income earned in India or repatriable
superannuation/ pension fund in India.
(iii) Conversion of
Rupee policies on the lives of persons resident in India into foreign currency
or transfer of records of such policies to a country outside India is not
permitted without prior approval of Reserve Bank.
b) Residents outside
India
(i)
Insurer in India may issue policies denominated in foreign currency through
their offices in India or abroad to residents outside India provided the
premium are collected in foreign currency from abroad or out of NRE/FCNR
accounts of the insured or his family members held in India.
(ii) For policies
denominated in rupees issued to residents outside India, funds held in NRO
accounts can be accepted towards payment of premium.
(iii) Policies issued to
Indian nationals and persons of Indian origin resident abroad by overseas
offices of Insurer in India may be transferred to Indian register, together
with the actuarial reserves held against the policies, on the policy holders’
return to India. Foreign currency policies in such circumstances shall be
converted into rupee policies except in cases where the policy has been in
force for at least 3 years prior to policy holder’s return to India and the
policy holder wishes to retain and continue the foreign currency policy.
Requests received for payment in foreign currency towards premium on such
policies may be permitted by authorised dealers provided the policy holder
undertakes to repatriate to India the maturity proceeds or any claim amounts
due on the policy through normal banking channels with in a period of seven
days from the receipt thereof.
2. Settlement of claims
(i)
The basic rule for settlement of claims on rupee life insurance policies in
favour of claimants resident outside India is that
payments in foreign currency will be permitted only in proportion in which the
amount of premium has been paid in foreign currency in relation to the total
premium payable.
(ii) Residents outside
India who are beneficiaries of insurance claims/maturity/surrender value
settled in foreign currency may be permitted to credit the same to NRE/FCNR
account, if they so desire.
(iii) (a) Resident beneficiaries of the insurance claims/ maturity/
surrender value settled in foreign currency may be permitted to open and credit
the proceeds thereof to their RFC (Domestic) Account.
(b) The Policy holder
Indian residents who were outside India, and are the beneficiaries of insurance
claims/maturity or surrender value settled in foreign currency in respect of
policies issued by Insurer in India may be permitted to credit the proceeds to
the RFC Account opened by them on their becoming residents.
(iv) Claims/maturity proceeds/ surrender
value in respect of rupee life insurance policies issued to Indians resident
outside India for which premium have been collected in non-repatriable
rupees may be paid only in rupees by credit to NRO account of the beneficiary.
This would also apply in cases of death claims being settled in favour of
resident outside India assignees/ nominees.
(v) Claims/maturity
proceeds/ surrender value in respect of rupee policies issued to foreign
nationals not permanently resident in India may be paid in rupees or may be
allowed to be remitted abroad, if the claimant so desires.
3. Commission to
overseas Agents
Insurer in India may pay
commission to their agents who are permanently resident outside India
regardless of the fact that part of the business booked by them may be on the
lives of persons resident in India and relative premium are paid in rupees in India.
Remittances of commission from India to such agents abroad will be governed by
instructions contained in Government Notification No.G.S.R.
381(E) dated May 3, 2000 relating to Current Account transactions as amended
from time to time.
4. Reinsurance
In terms of the existing
instructions, reinsurance arrangements for the insurance companies registered
with IRDAI are to be decided by the companies themselves on an annual basis
which is to be approved by the respective insurance company's Board in compliance
with IRDAI Regulations. Authorised dealers, designated by these insurance
companies may allow remittances falling due under such approved reinsurance
arrangements by the insurer in accordance with the terms and conditions laid
down by their Boards.
5. Foreign Currency
accounts
Insurer in India may
open, hold and maintain with a bank outside India foreign currency accounts for
facilitating transactions and expenses relating /incidental to life insurance
business undertaken in foreign countries in accordance with the above
guidelines. Insurer in India should transfer to India regularly all surplus
funds held at foreign centres and endeavour to keep in their foreign currency
accounts only minimum balances required for normal business.
6. Investments abroad
Insurer in India invest
freely, out of their funds abroad without prior approval of Reserve Bank
subject to
(i)
Statutory requirement of host country concerned and
(ii) IRDAI guidelines if
any and in accordance with applicable FEMA regulations relating to investment
abroad.
7.Utilisation of Foreign Currency
Funds
(i)
Insurer in India may freely use its foreign currency balances for meeting all
the normal expenses of its overseas offices inclusive of taxes and other dues
in connection with maintenance and upkeep of buildings and properties held by
insurers in foreign countries as well as purchase of cars for official use.
(ii) Insurer in India
may also freely use their overseas funds for settlement of provident fund,
gratuity and other retirement benefits to retiring employees of overseas
offices.
(iii) Insurer in India
may grant loans, without prior permission of Reserve Bank, to employees of
their overseas offices (other than Indian nationals who had been deputed or
posted from India) against provident fund balances held in the country
concerned provided loan recoveries will be made in foreign currency