ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Economy

Insurance sector hopes for $9.5 billion in five years

NEW DELHI -- The Indian parliament has amended an insurance law pending since 2008 that will raise the foreign investment cap from 26% to 49%.

     The move to allow greater foreign investment in the insurance sector could attract 600 billion rupees ($9.5 billion) in the next five years, and will enable Lloyds of London to set up branches in the country.

     The new legislation is considered a major victory for the pro-reform government of Prime Minister Narendra Modi, which came to power in May last year.

     The amended law "provides for enhancement of the foreign investment cap in an Indian insurance company from 26% to an explicitly composite limit of 49% with the safeguard of Indian ownership and control", according to a finance ministry statement.

     The state-run Life Insurance Corporation is the dominant player in the country's insurance sector, while General Insurance Corporation (GIC Re) is the sole reinsurer.

     According to the State Bank of India's Economic Research Department, the increase in the foreign investment limit could result in inflows of between 400 and 600 billion rupees over five years with "immediate inflows of around 200 billion rupees".

     Over the last 14 years, the Indian insurance industry has attracted nearly 340 billion rupees of foreign capital and needs as much again in the coming decade, according to the research document.

     With more foreign involvement, Indian insurance companies will have greater capital access and improved resources for product development.

     There is now "enough and more potential to jumpstart the sector on a long sustainable basis", Anuraag Sunder, managing consultant-insurance with PricewaterhouseCoopers India, told the Nikkei Asian Review.

     "Value unfolding may also take place through IPOs, consolidation and other possible routes," he said.     

     France's AXA, which has life and general insurance joint ventures with India's Bharti Enterprises, has already confirmed its intention to increase its stake to 49%.

     The amended law "enables Lloyds and its members to operate in India through setting up of branches for the purpose of reinsurance business or as investors in an Indian insurance company within the 49% cap", the finance ministry said.

     Even though GIC Re is the only reinsurer in India, business has been placed with foreign reinsurers in the past such as Swiss Re, Munich Re, Reinsurance Group of America, Asia Capital Re, and others.  

     "What has changed now is that these companies for the first time will have an on-the-ground presence in India which brings an altogether different exposure to the market," said Sunder.

     The operating framework will be overseen by the Insurance Regulatory and Development Authority of India (IRDAI).

     "It is still work in progress," said Sunder. "Once those rules come out from IRDAI, only then will we know how reinsurance will pan out in India."

     The Federation of Indian Chambers of Commerce and Industry hailed the legislation as "a new beginning".  

                                    

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more