General insurance firms are in favour of raising foreign direct investment (FDI) limit in the sector to 74 per cent.
Last week, the General Insurance Council (GIC), the representative body of general insurance, health insurance and reinsurance companies in India, met to discuss the view of insurance companies in raising the FDI. All the companies agreed on raising FDI limit to at least 74 per cent.
“Prima facie no company had reservations in increasing the FDI limit to 74 per cent,” said sources
Also several companies are in favour of 100 per cent FDI in the sector.
“The government is also considering the option of 100 per cent FDI in insurance. Insurance companies had several meetings on the matter with the government,” according to a source close to the development.
However, a few insurance firms, especially private ones who have foreign partners, raised concerns over issues such as valuations, although in-principal they agreed on raising FDI limit.
“Some joint venture partners may see change in positions in case FDI limit is raised to 74 per cent. That is why some companies had some concerns about safeguards, although no company opposed FDI,” said a person familiar with the development.
Notably, the Insurance Regulatory Development Authority of India (IRDAI) recently sought suggestions from various stakeholders on raising FDI to 74 per cent.
In September this year, IRDAI raised FDI limit in insurance intermediaries to 100 per cent. This is likely to bring in much needed capital in the sector, and increase the use of technology in the sector.
At present, FDI up to 49 per cent is allowed in the insurance sector through the automatic rout. Earlier, the approval for investment up to 49 per cent required approval by the Foreign Investment Promotion Board (FIPB), which was disbanded two years ago.
Finance minister Nirmala Sitharaman, in the Union Budget for fiscal 2020 had said the government will examine proposals for opening up FDI further in insurance in consultation with all stakeholders.
“Insurance companies sought more clarity in terms of ease in doing business and lesser restrictions. At present, frequently the laws keep changing, which has been a major concern for foreign insurance partners in India,” according to a source present in the meeting.