Indian Insurance sector to have Rs.12,000 cr FDI in 2016

With the liberalisation of foreign investment cap to 49% from 26%, several insurance giants announced raising of stakes in their Indian ventures

The Dollar Business Bureau 

India’s insurance sector is likely to receive Foreign Direct Investment (FDI) worth up to Rs.12, 000 crore during this year with a dozen of multinational companies planning to invest in joint ventures, said Associated Chamber of Commerce and Industry (ASSOCHAM).

According to the study, the passage of the Insurance Laws (Amendment) Bill in March 2015 has encouraged many foreign investors to pump in funds in their Indian joint ventures and raises their equities.

With the liberalisation of foreign investment cap to 49% from 26%, several insurance giants like AXA of France, Bupa of the UK, Nippon Life Insurance of Japan, announced raising of their stakes in their respective joint ventures and a dozen more including BNP Paribas Cardif, Standard Life Plc, among others, are expected to raise stakes in their ventures during the current year. Besides, at least 10 other companies are at different stage of deliberations, the study.

According to the data, at least nine companies have already applied for regulatory clearances to bring in foreign investment, which upon approval will lead to the inflow of funds up to Rs.6,000 crore.

 “So, more than Rs 12,000 crore is set to flow in the insurance sector comprising of both life and non-life during 2016. Besides, re-insurance sector would also see some fund flow as it has also got a leg-up through the amended Act,” said D S Rawat, General Secretary, ASSOCHAM.

According to Insurance Regulatory Authority of India (IRDAI, the total FDI in the sector as on March 31, 2015 was Rs.8,031 crore and the figure is expected to cross Rs.20,000 crore by the end of December, 2016, he added.

IRDAI had, in July 2015, announced that the holdings of Foreign Institutional Investors (FIIs) in Indian insurance promoters will not be part of the total FDI.

Although this was seen as a relief to several Indian entities that have a high FII holdings and a boost to the FIIs, experts say that this would result in FII having more control over domestic sector.

“There is also a danger that more investments beyond limits could result FIIs in having controlling stakes in Indian insurance sector, due to 49% FDI and their already-existing stakes in Indian entities,” United India Insurance Officers’ Association (UIIOA) had said.

The UIIOA said that this would be against the spirit of Indian Insurance Laws Amendment Bill 2015.

January 27, 2015 | 3:40pm IST

The Dollar Business Bureau - Jan 27, 2016 12:00 IST