NEW DELHI: The year 2009 saw insurance firms waiting for easing of foreign direct investment (FDI) norms, just as they have done every year for the last five years, but there is promise of the law being amended to this effect next year. The government had first mentioned raising FDI ceiling in insurance sector to 49 per cent from the current 26 per cent in the 2004 Union Budget and introduced a bill to do so over a year ago.
The Insurance Laws (Amendment) Bill, 2008, has since been referred to a Parliamentary Standing Committee.
The Parliamentary panel’s report is expected before the Budget session in February next year and passage of the bill is likely during the same year.
Although the global financial meltdown hit top insurers such as AIG, life insurers in India have seen new business premium collections rise ten-fold over as many years.
New premium collection has increased to Rs. 86,983 crore in 2009 as compared to Rs. 8,299 crore ten years ago when the sector was opened to private players.
There are 23 life insurance companies and 21 general insurers operating in the country, but their growth potential has not been tapped for want of capital, which could be addressed through raising the FDI ceiling.
“The FDI ceiling, if increased, could bring in the much-needed capital for the growth of the sector, as well as for the nation, as insurance players provide long-term capital for development of infrastructure,” DLF Pramerica Managing Director Kapil Mehta said.
Entry of foreign partners enabled the sector to attract Rs. 6,000 crore FDI, even as the bill to increase the FDI cap to 49 per cent is still pending in Parliament. — PTI