Posted by Akanksha on May 11th, 2012 No Comments
The insurance amendment bill, which was set to be tabled in parliament on Thursday, has been put on the backburner.However, Finance Minister, Pranab Mukherjee, has left a tantalising prospect of higher Foreign Direct Investment (FDI) in insurance by saying that foreign investment in Indian insurance companies is already 26% hence; there is no urgency to approve the bill.
Keeping the FDI limit at 26% in insurance sector is in line with the recommendation of parliament’s standing committee on finance headed by BJP leader Yashwant Sinha. Committee has suggested that instead of relying heavily on foreign capital Indian insurance companies should look at domestic capital market to raise funds.
However, insurers are not happy with this decision, as per them deferment is disappointing. If FDI cap had been increased it would have proved to be a big help for the struggling industry as it would have helped in capital mobilization.
Other recommendation that the industry is keenly watching is about the re-insurance sector to be opened to foreign players for branch operations. If it is cleared it will help foreign re-insurance companies such as Lloyd’s to freely operate in India. This will make reinsurance pricing competitive which will reduce the cost of Indian insurers.
Another recommendation is pertaining to third party liability in motor insurance. Committee has suggested capping it at Rs 10 lakh in case of death or bodily injury. Currently, the third-party liability is unlimited.
The insurance amendment bill, which was set to be tabled in parliament on Thursday, has been put on the backburner.However, Finance Minister, Pranab Mukherjee, has left a tantalising prospect of higher Foreign Direct Investment (FDI) in insurance by saying that foreign investment in Indian insurance companies is already 26% hence; there is no urgency to approve the bill.
Keeping the FDI limit at 26% in insurance sector is in line with the recommendation of parliament’s standing committee on finance headed by BJP leader Yashwant Sinha. Committee has suggested that instead of relying heavily on foreign capital Indian insurance companies should look at domestic capital market to raise funds.
However, insurers are not happy with this decision, as per them deferment is disappointing. If FDI cap had been increased it would have proved to be a big help for the struggling industry as it would have helped in capital mobilization.
Other recommendation that the industry is keenly watching is about the re-insurance sector to be opened to foreign players for branch operations. If it is cleared it will help foreign re-insurance companies such as Lloyd’s to freely operate in India. This will make reinsurance pricing competitive which will reduce the cost of Indian insurers.
Another recommendation is pertaining to third party liability in motor insurance. Committee has suggested capping it at Rs 10 lakh in case of death or bodily injury. Currently, the third-party liability is unlimited.
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