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Govt expects Rs 25,000 cr foreign investment in insurance sector

March 13, 2015 09:27 IST

Foreign capital to the tune of Rs 25,000 crore (Rs 250 billion) is likely to flow into the insurance sector, with Parliament approving hike in foreign investment cap to 49 per cent, Minister of State for Finance Jayant Sinha said.

"What we had estimated is, if we have to increase insurance penetration from 3 per cent currently to 6 per cent, then we will require capital somewhere in the range of Rs 40,000-50,000 crore (Rs 400-500 billion), of which of course 49 per cent will have to come from FDI.

"So we are talking about (foreign) investment in the range of Rs 25,000 crore in the insurance sector to really ensure that we get to 6 per cent penetration in the medium term," Sinha said.

Welcoming the announcement by French insurance company AXA and UK's Bupa for raising investment in Indian joint venture, he said it addresses the concerns that raising the foreign investment cap will not result in any fresh capital inflow.

"Now that we have a predictable, stable regime, we will see huge investment in insurance going forward," Sinha said.

Financial Services Secretary Hasmukh Adhia said raising foreign investment cap was only one of the several important changes that the Bill seeks to bring in the insurance sector.

"It seeks to remove archaic provisions of previous law and liberalise the sector... The insurance sector is going to get a big boost," he said.

Explaining the new provisions in the Insurance Laws Amendment Bill, 2015, he said insurance regulator IRDAI will have greater flexibility in regulating insurers while responsibility of insurance agents have been fixed for an orderly behaviour of the sector.

"Unnecessary constraints on insurance companies and agents have been removed. Regulation can bring more accountability on part of insurance players," he said, hoping the foreign investment will come in as fresh capital and not just buying out of stakes of Indian promoters in Indian joint ventures.

Asked about state insurer LIC, he said "everybody is going to prosper, everybody is going to gain out of it". 

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