NEW DELHI: The much-awaited Insurance (Amendment) Bill to allow 100% foreign direct investment (FDI) in the sector and usher in composite licensing will likely be taken up in the monsoon session of Parliament instead of the ongoing budget session, sources told FE.
“Consultation process is not yet complete. So, the amendments to insurance laws will be taken up in the monsoon session,” an official said.
The monsoon session typically takes place in July. The current budget session will end on April 4.
The move assumes importance as the government is in the process of selecting a successor to the Insurance Regulatory and Development Authority of India (IRDAI) chairperson Debashis Panda whose three-year term ended on Thursday.
IRDA had set up a high-powered committee in mid-February, led by former State Bank of India chairman Dinesh Khara to scrutinise various aspects of the Insurance Act 1938 and suggest amendments.
In a post-budget interaction on February 3, financial services secretary M Nagaraju had said that the bill has been approved by finance minister Nirmala Sitharaman and will be placed before the Cabinet for approval soon
Among others, the amendments would also relax the current guardrails and conditionalities on the repatriation of dividends and key management personnel for such foreign-owned insurance firms.
The bill will amend three laws—the Insurance Act, the Insurance Regulatory and Development Authority Act and the LIC Act. The amendment to the LIC Act is aimed at giving the state-run insurers more autonomy by giving them full freedom on the appointment of personnel and opening of branches.
The department of financial services released a brief consultation paper on the Bill in December 2024. The department said the proposed amendments aimed to ensure accessibility and affordability of insurance for citizens, foster expansion and development of the insurance industry, and streamline business processes. The sector requires capital inflows to grow and raise the insurance penetration level in the country.
The proposal further mentioned that the requirement of net owned funds for foreign re-insurers is also proposed to be reduced from Rs 5,000 crore to Rs 1,000 crore. It also proposed to empower the IRDA to specify lower entry capital (not less than Rs 50 crore) for underserved or unserved segments on a special-case basis. Micro insurance firms likely to benefit if capital requirement is lowered.
For composite licences, however, the minimum capital threshold may be higher than for separate licences for life and non-life insurance.
Insurance penetration in India is just 3.7%, whereas insurance density USD 95 in 2024. The global average for insurance penetration and density stands at 7% and USD 889 respectively in 2024.
Canada, Brazil, Australia, and China permit 100% FDI in their insurance sectors. Aligning India’s FDI norms with global best practices will position the country as an attractive destination for foreign investors.
The FDI limit introduced in 2000 with 26% cap, raised to 49% in 2015 and 74% in 2021. FDI limit in Insurance intermediaries allowed upto 100% since 2019.
In 24 years, just Rs 82,847 crore in FDI has flowed in to 41 insurance companies till September 2024.
Source: The Financial Express
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