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CS Professional · Banking and Insurance - Laws and Practice · General and Health Insurance

Suraksha Mutual Ltd, a company incorporated in Singapore, wishes to open a branch in India to sell motor and fire policies directly to Indian customers. Under section 2C of the Insurance Act, 1938 (as amended), what is the position?

A foreign-incorporated company can enter India only for re-insurance, through a branch set up exclusively for that purpose. Section 2C prohibits foreign bodies from carrying on any other class of insurance business, so selling direct motor and fire policies is not permitted.

  1. AIt may carry on any general insurance business if it opens a branch in India
  2. BIt may carry on only re-insurance business through a branch in India, and not direct insuranceCorrect
  3. CIt may sell direct policies if the Central Government exempts it for three years
  4. DIt may carry on direct insurance if it is registered as a society under the Co-operative Societies Act

Explanation

Section 2C allows a foreign body to establish a branch in India exclusively for re-insurance business. A further proviso bars any company established outside India from carrying on any class of insurance business other than re-insurance. The exemption proviso cannot be used to let a foreign insurer write direct business, since only an Indian insurance company may begin insurance business in India.

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