India may ease its grip on insurance

The Centre is likely to drop the clause that mandates control of insurance companies by Indian promoters as it seeks to enhance foreign direct investment (FDI) limit in the industry to 74% from 49%, said people with knowledge of the matter.The government has held several meetings with the insurance regulator, insurers and consultants on higher FDI in the sector. Many global insurers, such as Metlife and Generali, have not raised their stakes in Indian operations due to the clause that was introduced in 2015.“The government will amend the relevant provision while dropping control and ownership clause of the Insurance Act through the Finance Bill,” said an official at the Insurance Regulatory and Development Authority of India (Irdai).73788679 Cabinet Note in the Work“It has decided to prepare a cabinet note proposing higher FDI of 74%,” the official said.The FDI increase is being evaluated very carefully, said a source close to the development. “The complexity of ‘Indian owned and controlled’ is involved, and the government is looking to address this issue,” he said. Regulations on royalties, dividends, ring-fencing of balance sheets and board composition are also likely to be reviewed, said another person who had attended the meetings.It’s been proposed that overseas investors start at 49% and raise their stake to 74% over time. However, foreign insurers have suggested that the limit be set at 74% from the outset.The government raised the FDI ceiling in insurance to 49% from 26% in March 2015. This prompted foreign promoters to increase their stakes in joint ventures besides paving the way for initial public offerings. Among the listed life insurers are HDFC Life, SBI Life and ICICI Prudential. Listed general insurers include ICICI Lombard, GIC Re and New India Assurance. India has 24 life insurance companies and 34 general insurance companies.Before the 2015 change, the Insurance Act did not require domestic ownership and control. It was therefore possible for offshore strategic partners to have substantial control, including over reserved matters or veto rights on operational and financial policy decisions.The government increased the FDI limit in insurance intermediaries to 100% in September, a move aimed at opening up the large-scale professional advisory space to investment.

from Economic Times https://ift.tt/2tha9RG