SEARCH

Business » Economy

Updated: October 5, 2012 01:48 IST

FDI in insurance hiked to 49 %

Special Correspondent
Comment (5)   ·   print   ·   T  T  
Finance Minister P Chidambaram addressing a press conference in New Delhi on Thursday. Photo: Kamal Narang
Finance Minister P Chidambaram addressing a press conference in New Delhi on Thursday. Photo: Kamal Narang

The public sector general insurance companies and the GIC will be permitted to raise capital from the market to meet future capital requirements

The Union Cabinet, on Thursday, granted approval for increase of foreign direct investment (FDI) limit in the insurance sector from the present 26 per cent to 49 per cent. Alongside, it also cleared amendments aimed at attracting investments and bringing transparency in the working of the insurance companies.

The Cabinet approved amendments to the Insurance Laws (Amendment), Bill, 2008, pending in the Rajya Sabha.

These amendments are aimed at removing archaic and redundant provisions in the legislations and incorporating certain provisions to provide the Insurance Regulatory Development Authority (IRDA) with flexibility to discharge its functions effectively and efficiently. The overall objective is to further deepen the reform process which is already underway in the insurance sector, an official statement said here.

The approved amendments include that the foreign equity cap is proposed to be kept at 49 per cent as provided in the Insurance Laws (Amendment) Bill, 2008, as against the 26 percent.

This is done to meet the growing capital requirement of insurance companies. Foreign re-insurers will be permitted to open branches only for re-insurance business in India and the provisions of Section 27E, which prohibits an insurer to invest directly or indirectly outside India the funds of policy holder, would apply to such branches.

To encourage health insurance in India, the capital requirement for a health insurance company is now proposed at Rs.50 crore (instead of Rs.100 crore for general insurance companies) with a view to reducing the entry barrier to a priority sector in the insurance space.

The government has also revised the definition of ‘health insurance business’ to clearly stipulate that health insurance policies would cover sickness benefits on account of domestic as well as international travel.

Regarding the obligatory underwriting of third party risk on motor vehicles, a separate Motor Vehicle Insurance and Compensation Legislation is being proposed by the government and the concerns of the Standing Committee regarding the obligatory third-party insurance on motor vehicles will be taken care of, the statement said.

The public sector general insurance companies and the GIC will be permitted to raise capital from the market to meet the future capital requirements, provided that the government’s shareholding would not be allowed to come below 51 per cent at any point of time.

To improve the functioning of surveyors and bring in greater transparency, certain modifications are made to provide for regulations on qualifications regarding appointment of surveyors and to strengthen the Institute of Indian Insurance Surveyors and Loss Assessors (IIISLA). The amendments proposed in the Bill seek to do away with the existing statutory prescriptions pertaining to licensing insurance surveyors and loss assessors etc. and leave these issues to be addressed by way of regulations.

More In: Economy | Business

Can we add a clause that the Foreign companies invest majority of the fund in India? When the premium of Indians are paid from India, its only fair that much of it is used for the Indian industry. I am not asking for all, as you would want to spread the risk. Nor did i want to hold your profits. But let the majority of the money that are collected as premiums not move out of the country.

from:  Rajesh
Posted on: Oct 5, 2012 at 17:06 IST

Too late, but anyhow this is excellent move of GoI to strong the position of Indian rupee against dollar in international market.

from:  RAJNEESH KATOCH
Posted on: Oct 5, 2012 at 16:56 IST

it's a good sign but health has to be monitored from grass root level, money won't
bring rational changes.

from:  Nikhil
Posted on: Oct 5, 2012 at 12:54 IST

We are yet to learn the lessons from Europe and USA in regards to
the disasterous methods adopted by Insunrance and Pension fund managing companies which crashed in 2008 leading lots of subscribers and common man in lurch. What is the great hurry for this Govt to push through these reforms as though foreign funds will start flooding. Even if it is so
investors will repatriate double or treble the amount they may invest in our country and once again allowing the rupee to depreciate very badly like what is happening today. In the year of Independence value of one Rupee was equivalent to one US dollar. today it is Rs.53/.
By rushing through these reforms if Congress dreams that they can come back to power then they are in fool's paradise.

from:  k.gopu
Posted on: Oct 5, 2012 at 12:01 IST

Good and dynamic steps of UPA2 government to rejuvenate the Indian
underperformed industrial economic system

from:  DTSREDDY
Posted on: Oct 5, 2012 at 10:04 IST
This article is closed for comments.
Please Email the Editor

Commodity prices

Take a look at the prices of various commodities in Chennai here»

The World Economic Forum's Annual meet



O
P
E
N

close

Recent Article in Economy

CIC to decide if corporate debt restructuring falls under RTI

 The Central Information Commission (CIC) will soon have to decide whether a body set up by the Reserve Bank of India (RBI), whose princi... »