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With 100% FDI boost, MNCs to drive Capital and innovation in insurance

With 100% FDI boost, MNCs to drive Capital and innovation in insurance
With 100% FDI boost, MNCs to drive Capital and innovation in insurance

Mumbai: The insurance industry is poised for significant growth and innovation following the government’s decision to allow 100% foreign direct investment (FDI) in the sector. This policy shift is expected to bring in fresh capital, with many multi-national giants likely to make large investments, now that they no longer face challenges of control or securing contributions from Indian partners.
According to the IRDAI annual report, India currently has 26 life insurers, 25 general insurers, and 7 standalone health insurers, with Rs 35,000 crore paid-up capital in life insurance and Rs 40,375 crore in the non-life segment. The government’s move to increase the FDI limits is further clarified in the budget, which states that the proceeds of ULIPs, which do not benefit from tax exemptions, will be taxed at a capital gains rate of 12% instead of the higher marginal tax rate, which can go up to 30%. Also reinsurance for crop cover has been exempt from service tax and threshold for tax deduction at source on insurance commission has been increased to Rs 20000 from Rs 15000 earlier.
In the post-budget press conference, M. Nagraju, financial services secretary clarified that the FDI relaxation was one of the measures in insurance proposed and the amendments would include relaxation on the appointment of key management personnel and other norms.
Anup Rau, MD & CEO of Future Generali India Insurance, said, “With just over 60 insurers operating in both life and general insurance sectors, and many of them functioning as joint ventures, the shortage of capable and willing local partners is evident.” He also pointed out that since the government first liberalized the FDI norms in 2015, allowing 49% FDI, and raised it to 74% in 2021, the sector has attracted close to Rs 54,000 crore in FDI. He added, “There are too few players in India considering that the US has over 5,000 insurers and the UK around 400.”

Tapan Singhel, MD & CEO of Bajaj Allianz General Insurance, said, “We could see India moving towards a future with 1,000 insurers in the next decade.” He believes this growth will foster greater competition, innovation, and customer-centric products, ultimately benefiting consumers with more choices and stronger financial protection.
Prashant Tripathy, MD & CEO of Axis Max Life Insurance, said the move would not only deepen investments but also encourage innovation, enhance competition, and accelerate insurance penetration. “With strengthened investment, the industry can further drive digital transformation, develop customer-centric solutions, and expand its reach to those who need it most,” he added.
Stocks of listed insurance companies rallied on Saturday with the industry expected to see a re-rating. “The Budget 2025’s increase in FDI to 100% from the current 74% will aid foreign insurers’ interest in investing in the growing Indian insurance market, where we expect strong premium growth to boost profitability. Foreign investment is credit positive for the Indian insurance sector as it increases product innovation and benefits areas such as capital adequacy, financial flexibility, and governance standards,” said Mohammed Ali Londe, Vice President, Senior Analyst, Moody’s Ratings.

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