Page 26 - India Insurance Report 2023- BIMTECH

14 India Insurance Report - Series II

other than defined for Life insurances business and Health insurance business.”

b) Consequently, the definitions for fire insurance business, marine insurance business and miscellaneous
insurance business will be dropped from the Insurance Act.

These recommended changes would allow the Regulator to lay down a regulatory framework to
cater better to Indian market needs, especially in the agriculture, liability and disaster insurance products.
Much of the modern non-life insurance in India revolves around Property, Casualty, Marine, Health,
Agriculture, Disaster insurance, Liability, Trade credit, Energy and Aviation etc. and the Regulator is
better positioned to deal with these rather than seeing some of these defined with outdated outlines,
especially in a world with fast changing risk and exposure profiles in the primary legislation.

j. Licensing, Capital Adequacy, Risk Management and Governance of Insurance Firms

All of these require close observation and changes keeping in view the market dynamics and control
requirements. It is appropriate to vest the responsibility with the regulator to administer through
subordinate legislation rather than have these in the primary legislation.

k. Principle Based Prudent Man Approach To Investments

Regulators should be empowered with principles based prudent man approach to investments rather
than mandating them in primary legislation u/s 27, 27A, 27B and 27D of the Insurance Act - Section 27
of the Insurance Act says, “No insurer shall directly or indirectly invest outside India the funds of the
policy holders”.

The Insurance Regulator should be empowered to allow overseas investments adequately diversified,
to avoid excessive reliance on any specific asset, issuer, counterparty, group, or market and also to
mitigate the risks associated with investments in the domestic market. It is also important to have prudent
man approach norms and correlate the underwriting disciplines and the performance of the insurers
with the freedom they are accorded to deal with the investments of their funds. The investment regulations
are equally applicable to both insurers and reinsurers, which impacts the diversification of risks since
both are investing in the same market. Therefore, overseas market investments must be allowed for the
reinsurers, earmarked for the Indian policyholders.

l. Principle Based Approach to Management of Distribution: Sections 40 and 42

Section 40 of the Act should leave the Regulator with all the authority to regulate and manage the
intermediation, including the penal provisions on the basis of solvency and prudent business norms.
Within the ambit of the regulations, the insurers would be responsible for the recruitment, training,
compensation and conduct of the agents etc. under the principal-agent relationship principle.