India allows 100% FDI in insurance sector
What's the story
The Indian government has announced a major change in the foreign direct investment (FDI) policy for the insurance sector. The Ministry of Finance issued a notification on May 2, allowing 100% automatic FDI in the insurance sector and intermediaries. This includes entities such as brokers, re-insurance brokers, consultants, and corporate agents. However, Life Insurance Corporation of India (LIC) will continue to have a foreign investment cap of 20%.
Impact
Policy aims to enhance competitiveness of India's insurance market
The revised FDI policy is expected to bring in more capital and make the insurance sector more competitive. The government has said that foreign investment will be allowed on the automatic route, but it will still need approval and verification by the Insurance Regulatory and Development Authority of India (IRDAI). This way, regulatory oversight is maintained while allowing greater foreign participation in India's insurance market.
Regulations
New rules for foreign investment in insurance intermediaries
The new policy also mandates that at least one among the Chairperson, Managing Director or Chief Executive Officer of companies with foreign investment should be a Resident Indian Citizen. These firms must also comply with existing laws and disclosure norms prescribed by authorities. For insurance intermediaries with majority foreign ownership, additional requirements include incorporation under the Companies Act, 2013, and obligations to bring in the latest technological and managerial skills.