The foreign ownership cap for the sector is set to be raised to 74%, but prospective investors are waiting for details of yet-to-be announced ‘safeguards’ before they have a flutter. Freny Patel reports
The proposal to raise the foreign ownership cap in India’s insurance sector to 74% will open the floodgates for many international insurers, which until now were sitting on the fence, as with a 49% shareholding they would not have control. As such, 1 February was a great day for insurers, when Finance Minister Nirmala Sitharaman proposed relaxing foreign shareholdings from the existing 49% in her budget address.
Canadian insurers Manulife Financial Corporation and Intact Financial Corporation, Switzerland’s Chubb, South Africa’s Discovery, South Korea’s Samsung Life Insurance, and a host of other international players are believed to have expressed interest in the Indian market – when the foreign ownership caps are relaxed.
“A fair share of new companies are expected from the US, EU, Australia, and developed countries in Asia, which have run out of growth and have been eyeing India for some time, but wanted control,” says Joydeep Roy, a partner at PwC, heading the insurance practice. “New companies would mean new product offerings and new practices,” he adds.
This game changer, attracting new insurance players, would also strengthen solvency, boost competition and increase the penetration of insurance in the market. More insurance players would mean that more risk is shared among many.