Govt plans to increase FDI limit to 74% in insurance firms

To attract long-term investment from overseas, the Indian government is planning to increase the Foreign Direct Investment (FDI) limit for insurance firms to 74% in the upcoming Budget. The current FDI limit is 49%.

A report is expected to be submitted soon and the Insurance Regulatory and Development Authority of India (IRDAI) is already seeking inputs from the industry on government instructions.

On December 2, IRDAI in a letter to insurance firms had sought the opinion of stakeholders to increase the limit of FDI in the insurance sector.

Just two months back, the govt had increased the FDI limit in insurance intermediaries to 100%. This was done to increase overseas investors’ attention in the Indian insurance market. If things fall into place as planned, it will be the second raise in FDI limit for the sector in the past four years.

The government had in 2015 increased FDI in insurance under the automatic route to 49% from 26% for insurance broking, insurance companies, third party administrators, surveyors, and loss assessors.

The government will however have to amend the Insurance Act, alter provisions pertaining to Indian ownership, monitor the solvency of foreign firms to facilitate the 74% investment limit.

The insurance sector in India still has potential to grow as it has a very low penetration level across the country; only 4% of people in India are said to have life cover.

India has currently 24 life insurance and 34 general insurance firms.