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Foreign Exchange Management (Insurance) Regulations, 2000 - Life
Insurance Memorandum (LIM)
A.P.
(DIR Series) Circular No. 72 dated 17th January 2003
Attention
of authorised dealers is invited to the Notification No. FEMA 12/2000-RB dated
May 3, 2000 viz., Foreign Exchange Management (Insurance) Regulations, 2000. The
Memorandum of Exchange Control Regulations relating to Life Insurance in India
(LIM) since brought out is enclosed. The major changes in procedure as per
Memorandum are summarised in the Annexure.
2. Necessary amendments to the Foreign
Exchange Management Regulations, 2000 are being issued separately.
3. Authorised Dealers may bring the
contents of this circular to the notice of their constituents concerned.
4.
The directions contained in this circular have been issued under Section
10(4) and Section 11(1) of the Foreign Exchange Management Act 1999 (42 of
1999).
ANNEXURE
A.P.
(DIR Series) Circular No. 72 dated 17th January 2003
Major
changes proposed in the revised LIM
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Sr.
No.
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Subject
Matter
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Changes
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1.
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Scope
of Memorandum
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The
earlier instructions of LIM covered only LIC, which was the only
institution, permitted to undertake the business of Life Insurance. The
present instructions contained in the Memorandum are applicable to LIC as
well as Life Insurance Companies, which are registered with IRDA.
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2.
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Re-insurance
Arrangement
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The
re-insurance arrangement of Life Insurance Companies registered with IRDA
are to be decided by the Company's Board themselves and IRDA is to be kept
informed. Authorised Dealers designated by these insurance companies are
now permitted to make remittances falling due under such approved
re-insurance arrangements.
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3.
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Settlement
of claims in foreign currency favouring residents and crediting the same
to RFC Accounts.
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In
the LIM issued under FERA, residents were not permitted to retain any
receipts in foreign currency as the same had to be surrendered to the
authorised dealer within 7 days. Under FEMA resident beneficiaries of
foreign currency life insurance policies are being permitted to retain the
proceeds in foreign currency in RFC Accounts.
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4.
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Permitting
credit of foreign currency claims favouring non-residents to NRE/ FCNR
Accounts.
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In
the revised LIM the proceeds of policies denominated in foreign currency
or the rupee policies for which premia are paid in foreign currency or out
of NRE/FCNR Accounts are now permitted to be credited to NRE/FCNR Account
of non-resident without prior approval of Reserve Bank.
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5.
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Restrictions
on issue of rupee policies to foreign nationals
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The
restrictions on issue of rupee policies maturing within 7 years to foreign
nationals not permanently resident in India have been withdrawn.
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6.
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Export
of Policies
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The
restrictions in regard to export of policies have been withdrawn under
revised LIM.
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7.
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Instructions
addressing Exchange Control concerns
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The
revised LIM is modified in such a manner whereby only issues of exchange
control concern are addressed. Other operational instructions not relating
to exchange control have been excluded.
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A.P.
(DIR Series) Circular No. 72 dated 17th January 2003
LIM
- Memorandum of Foreign Exchange Regulations Relating to Life Insurance in India
1.
Introduction
Life insurance business in India
can be undertaken by insurance companies registered with Insurance Regulatory
and Development Authority (IRDA) and as per the regulations notified by Reserve
Bank of India under Notifications No. 1 and 12/2000-RB dated May 3, 2000.
2.
Scope of Memorandum
Exchange Control Regulations
governing issue of life insurance policies in rupees and foreign currencies to
non-residents, collection of premia, settlement of claims, maintenance and
operations of foreign currency accounts abroad, reinsurance, investment of
surplus funds abroad and allied matters are set out in this Memorandum. The
receipt and payment of foreign exchange shall be as per Notification FEMA
14/2000-RB dated May 3, 2000 i.e. Foreign Exchange Management (Manner of Receipt
and Payment) Regulations. For current account transactions, insurers may be
guided by the rules notified by Government of India vide G.S.R. 381(E) dated May
3, 2000, as amended from time to time and the various notifications issued under
FEMA 1999 by Reserve Bank.
3.
Definitions
For the purpose of this
Memorandum the terms "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).
"Foreign nationals"
will have the same meaning as defined in Regulation 4 of FEMA Notification No.
12/2000-RB dated May 3, 2000.
"Person of Indian
Origin" will have the same meaning as defined in FEMA Notification No.5
/RB-2000 dated May 3, 2000.
4.
Issue of policies and collection of premia
a.
Residents
(i)
Policies may be issued in foreign currency to resident persons of Indian
nationality or origin who has returned to India after being non-resident
provided the premia 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 premia are 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.
Non-Residents
(i)
Insurers may issue policies denominated in foreign currency through their
offices in India or abroad to non-residents provided the premia 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 non-residents, funds held in
NRO accounts can be accepted towards payment of premia.
(iii) Policies issued to Indian nationals and persons of
Indian origin resident abroad by overseas offices of insurers 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
premia 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.
5.
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 premia paid in foreign currency in relation to the total
premia payable.
(ii)
Non-resident 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)
Resident beneficiaries of insurance claims/maturity/surrender values
settled in foreign currency may be permitted to credit the same to RFC accounts,
if they so desire.
(iv)
Claims/maturity proceeds/surrender value in respect of rupee life
insurance policies issued to non-resident Indians for which premia 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 non-resident 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.
6.
Commission to overseas Agents
Insurers 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 premia 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.
7.
Reinsurance
In terms of the existing
instructions, reinsurance arrangements for the insurance companies registered
with IRDA are to be decided by the companies themselves on an annual basis and
approved by the respective insurance company's Board in consultation with IRDA.
Authorised dealers, designated by these insurance companies may allow
remittances for the reinsurance arrangements in accordance with the terms and
conditions laid down by the respective Board of insurance companies.
8.
Foreign Currency accounts
Insurers 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 regulations laid down in the
Memorandum. Insurers 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.
9.
Investments abroad
Renewal of existing investments,
reinvestment of redemption proceeds of existing investments and fresh
investments out of funds held abroad, in Government/Semi-Government securities
and bank deposits may be made by insurers freely without prior approval of
Reserve Bank provided they are for meeting statutory requirements in the foreign
country concerned. All other investments will require prior approval of Reserve
Bank.
10.
Utilisation of Foreign Currency Funds
(i) Insurers 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)
Insurers may also freely use their overseas funds for settlement of
provident fund, gratuity and other retirement benefits to retiring employees of
overseas offices.
(iii)
Insurers 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.
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