What India-UAE commerce pact provisions say on gold

The improved 74 per cent international direct funding window and nudges by the regulator for itemizing acquired a lukewarm response, though there are expectations that the insurance coverage sector may see renewed funding exercise on these fronts within the coming months.

This was additionally just lately flagged by the brand new IRDAI Chairman Debasish Panda, who mentioned the regulator is reviewing funding norms for the sector to usher in extra investments and deepen the insurance coverage penetration within the nation.

Key measures beneath this may be itemizing in addition to larger international direct funding.

“This may be finished by measures corresponding to itemizing of insurance coverage firms, which might additionally allow better transparency and disclosure,” he had mentioned, noting that with the LIC itemizing, near 60 per cent of the market would get listed.

“That brings in numerous transparency, disclosures, and entry to the market to boost capital. This can assist them develop, and our final goal of deepening insurance coverage penetration will occur,” mentioned Panda.

Solvency ratios

Specialists level out that the majority insurers proceed to have good solvency ratios regardless of the Covid-19 pandemic resulting in larger claims. Nevertheless, they might require capital for enterprise enlargement.

Increased FDI limits will entice extra international capital, which can support in rising insurance coverage penetration in India, mentioned LIC has mentioned in its DRHP.


Increased FDI limits will even allow extra international insurance coverage companies to enter India and convey of their greatest practices, thereby rising competitors and higher pricing of insurance coverage merchandise, per the LIC doc.

“There are a number of different advantages on rising the cap, which embody: (1) due to higher availability of extra capital than earlier, the insurance coverage firms can enhance impetus on enterprise progress and diversification of their portfolio and (2) extra choices accessible to customers with a rise in competitors, which additionally results in higher gives for them,” it additional famous.

That is essential for a rustic like India, which is under-insured, in comparison with extra developed economies.

Whereas the penetration of life insurance coverage sector went up from 2.15 per cent in 2001-2002 to three.20 per cent in 2020-2021, non-life insurance coverage penetration went up from 0.56 per cent to 1.00 per cent in the identical interval.

Insurance coverage density (ratio of premium in US greenback to whole inhabitants) in India remained similar throughout 2019-20 and 2020-21 on the stage of $78, in line with IRDAI’s Annual Report. Enhanced FDI cap

Nevertheless, practically a 12 months after the federal government permitted larger international direct funding of as much as 74 per cent in insurance coverage firms, just a few insurers have used this window to extend stake of their Indian ventures.

This consists of Ageas Federal Insurance coverage and the Future Generali insurance coverage joint ventures.


Shailaja Lall, Accomplice, Insurance coverage, Shardul Amarchand Mangaldas & Co, mentioned the insurance coverage market in India is evolving and maturing quickly.

“The 74 per cent FDI cap for insurance coverage firms can also be seeing its fair proportion of curiosity. The great factor is that there aren’t any conditionalities, such because the requirement for Indian possession and management, which existed earlier.

“Many firms are ready and watching. Some are additionally in negotiations to overview their very own JV contract clauses,” she mentioned, including that additionally it is about what number of firms wish to consolidate their operations in India. To be honest, numerous insurers have used the improved FDI cap of 49 per cent. Many insurance coverage intermediaries and brokers corresponding to Willis Towers Watson, Marsh and Gallagher have additionally used the 100 per cent FDI window for his or her Indian ventures.

Information with IRDAI point out that in opposition to the 49 per cent FDI cap in insurance coverage sector, the common international funding in Indian life insurers was 35.44 per cent as on March 31, 2021. It was 27.68 per cent for personal sector non-life insurers and 29.38 per cent for personal standalone well being insurers in the identical interval.

Sooner approvals

There may be expectation of some streamlining of processes and approvals to allow investments in a smoother and quicker method. Nevertheless, a blanket 100 per cent enhance in FDI cap for the sector is probably not within the offing.

G Srinivasan, Director, Nationwide Insurance coverage Academy, mentioned the upper FDI window of 74 per cent will result in extra capital into the insurance coverage sector, which can allow extra enlargement and penetration.

“Nevertheless, it can occur solely steadily, and it’s a name that must be taken by every insurer on whether or not or to not enhance FDI,” he mentioned, including that there may be must overview the processes for such approvals in order that they will undergo extra shortly.


Lall additionally mentioned the processes have to be streamlined for quicker approvals. “For example, any change in shareholding of greater than 1 per cent wants approval from the IRDAI, and may take so long as three months. This may be very time consuming for a PE investor,” she mentioned.

Additional, from a regulatory perspective, international traders will consider whether or not they wish to be in a regime the place there may be numerous unexpected regulatory modifications, which can influence their funding and management, she mentioned. An business supply famous that many firms had been wanting on the larger FDI window. However that they had put their plan on the backburner as the federal government left the highest place vacant for about 10 months after IRDAI chief SC Khuntia accomplished his time period on Might 6, 2021.

The IRDAI has been nudging insurers to checklist on the bourses for a while now. However solely a handful of firms have finished so. This consists of HDFC Life, ICICI Life Insurance coverage and ICICI Lombard Normal Insurance coverage, SBI Life Insurance coverage, New India Assurance and the most recent being Star Well being and Allied Insurance coverage.

Whereas state-run life insurance coverage behemoth LIC is about to debut on the bourses someday this quarter, most different insurers don’t have such plans for now.

“Itemizing is within the pursuits of all stakeholders and can result in extra governance and transparency. It’s going to additionally enhance the profile of the sector and enhance insurance coverage penetration,” mentioned Srinivasan, however added that the choice to checklist will rely upon the promoters and the board of every insurer.

The pinnacle of an insurance coverage firm additionally agreed and mentioned the choice on when to checklist rests with shareholders.

“However as an insurance coverage firm, we’re very forthcoming with disclosures. The thought behind itemizing is to convey extra transparency and that we’re already doing by our common disclosures,” he mentioned, including that with the mega preliminary public providing of LIC coming in, extra firms might think about itemizing on the bourses.


Lall mentioned that with a lot PE investments in insurance coverage firms, there could possibly be extra cases of itemizing once they select to exit.

Revealed on

April 24, 2022

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