Rajya Sabha Passes Bill To Hike FDI Cap In Insurance To 74%
The Rajya Sabha on March 18 passed The Insurance (Amendment) Bill, 2021, to increase foreign direct investment limit in the sector from 49% to 74%.
While replying to the debate on the bill, Finance Minister Nirmala Sitharaman said insurers were facing liquidity issues and the proposed law will lead to increased employment opportunities.
The minister said there were enough safeguards to protect the interest of insurance claimants and representation of majority Indian residents on board of the insurance companies is being ensured.
The bill needs to be passed in the Lok Sabha, which will then require the President’s assent to become a law.
Here are a few highlights from the minister’s reply:
- Insurance companies aren’t getting adequate resources to meet business development and solvency needs
- Need more resources so that insurers can compete healthily; today they are facing liquidity pressures.
- Insurance sector has attracted Rs 26,000 crore worth FDI since 2015 when the limit was increased to 49% from 26%.
- Total assets under management has risen 76% in five years, compared to a nominal GDP growth of 63%.
- From 2015 till date, three more insurance companies have come into play; earlier there was one reinsurance company, now there are 12.
- Total employees, including agents, in private insurance sector is at 23.71 lakh, which is more than 17.10 lakh in the public sector.
- There are enough safeguards in the new insurance law for hiking FDI limits.
- Twenty-two out of 56 direct insurance companies in India have already received around 40% of FDI.
- The average FDI in private insurance, other than the reinsurance companies, is 31% only–much lower than the 49% limit.
- Citizens’ insurance claims are being protected through a general reserve that is being created.
- Majority of directors on the insurance company board will be resident Indians; half of them will be independent directors.