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Govt permits FIIs, NRIs to invest in insurance sector under 26% FDI cap

06 February, 2014

The government has permitted foreign institutional investors (FII) and non-residents Indians (NRIs) to invest in the insurance sector within the overall 26 per cent cap on foreign direct investment, under the automatic route, according to a press note.

The new norms also apply on intermediaries like insurance brokers, third-party administrators (TPAs), surveyors and loss assessors, apart from insurance companies, the Department of Industrial Policy and Promotion, under the Ministry of Commerce, has clarified.

The new norms will however be subject to the condition that foreign investors putting in money in Indian insurance firms need to have necessary license from the Insurance Regulatory & Development Authority. The decision will come into force with immediate effect.

This eases investment norms for Indian insurers especially for those firms who do not a foreign partner. Such companies can raise more funds through such financial investors.

This comes at a time when the proposed Insurance Bill, which is yet to be cleared by the parliament, seeks to hike the FDI limit in insurance sector to 49 per cent from current 26 per cent.

In India, most of the insurance companies operating in the country are 74:26 joint ventures between Indian companies and foreign insurers.

Lately, some such ventures have seen the exit of the foreign partner and in a few cases the local promoter has diluted or sold entire stake to other domestic firms.

Last month, the insurance regulator formed a 10-member panel —  headed by IRDA senior joint director Suresh Mathur — to look into the possibility of increasing FDI in insurance intermediaries and TPAs, after it received requests from various stakeholders. The final report on the same is expected to be submitted in three months.

(Edited by Joby Puthuparampil Johnson)


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Govt permits FIIs, NRIs to invest in insurance sector under 26% FDI cap

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