RBI/2016-17/137
A.P. (DIR New Series) Circular No.18 [(1)/12 (R)]
November 17th, 2016
To
All Category - I Authorised Dealer Banks
Madam/ Sir
Foreign Exchange Management (Insurance)
Regulations, 2015
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repealed in consultation with the Government of India and superseded by the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.
Yours faithfully,
(Shekhar Bhatnagar)
Chief General Manager-in-charge
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. |
- Resident going abroad for employment purpose may also take
health insurance policy on payment of premium in INR.
- 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
-
"Person resident in India" and "Foreign Currency" will have the same
meaning as defined under Foreign Exchange Management Act, 1999.
-
“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.
-
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.
-
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.
-
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).
-
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.
-
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
-
"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).
-
"Person of Indian Origin" will have the same meaning as defined in
Notification FEMA 5(R)/2016-RB dated April 1, 2016.
-
‘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.
-
“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
-
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.
-
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
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