Foreign investment of over Rs 12,000 crore is expected to land in the country as more than dozen foreign companies are planning to raise their stake in private sector insurance joint venture this year, an Assocham study said.
The liberalisation of foreign investment ceiling from 26 per cent to 49 per cent last year through the passage of Insurance Laws (Amendment) Bill last year, has opened the gateway for foreign investment in the Indian insurance industry.
The bill was passed by the parliament in March clearing decks for foreign entities to increase their stake in local private sector insurance companies. Foreign investors started ploughing capital into their Indian joint ventures, raising their equity holdings once the law came into effect.
Companies including AXA of France, Bupa of the UK, Nippon Life Insurance of Japan announced raising stake in their respective joint ventures.
The year 2016 began with Rs 1,705 crore investent proposal by UK's Standard Life in its Indian insurance JV with HDFC - HDFC Standard Life Insurance - to buy additional 9 percent stake in the company. After the transaction the stake of Standard life in HDFC Standard Life will increasee to 35 percent.
Based on the suggestions of Foreign Investment Promotion Board (FIPB), the proposal of HDFC Standard Life Insurance has been referred to Cabinet Committee on Economic Affairs (CCEA) for its approval. The money will flow as the approval from Cabinet comes, said ASSOCHAM.
Besides, more than a dozen foreign companies including BNP Paribas Cardif, Insurance Australia Group, Aviva Plc, Standard Life Plc, AIA, QBE Insurance Group and Fairfax Financial Holdings of Canada are expected to raise stakes in their ventures during this year.
Mitsui Sumitomo Insurance Company of Japan also proposed to increase stake to 40 per cent from 26 per cent in Cholamandalam MS General Insurance Company for consideration of about Rs 883 crore.
About 9 insurance companies have already applied for regulatory clearances to bring in foreign investment, as per the data compiled by Assocham. If these proposals get approval, it will lead to inflow of about Rs 6,000 crore of foreign capital.
In addition, 10 companies are at different stage of deliberations with regard to increasing stake in their Indian insurance joint venture. “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 get a leg-up through the amended Act,” said Mr. Rawat.
According to IRDAI, the total FDI in insurance sector as on March 31, 2015, was about Rs 8,031 crore. “This figure could well cross Rs 20,000 crore by the end of December this year” he said.
There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in the general insurance. State-owned General Insurance Corporation (GIC), in addition, is the sole national reinsurer. In order to deepen the re-insurance market, IRDAI permitted UK-based Lloyds to set up business in India.
Lloyds India will ensure that the market and the constituents are housed in one location for the conduct of reinsurance business.
It is to be noted that AXA raised stake in both life and non-life insurance ventures with Bharti Enterprises, leading to foreign capital inflow of about Rs 1,300 crore.
Japan's Nippon Life Insurance, too, announced the acquisition of another 23 per cent stake in Reliance Life Insurance for about Rs 2,265 crore. At the same time, Bupa also announced to raise its stake to 49 per cent in Max Bupa Health Insurance for Rs 191 crore.
The Netherlands based Ageon has also increased its stake in life insurance venture Aegon Life Insurance Company to 49 per cent.