FII, NRI investments will also be counted in 26% cap; limit to apply to brokers, TPAs

The Government has clarified that the 26 per cent cap on foreign investments in the insurance sector also applies to intermediaries such as brokers, third party administrators and surveyors.

In the case of insurance companies, the 26 per cent cap will include foreign direct investment (FDI), foreign institutional investments (FIIs) and investments from non-resident Indians (NRIs), according to a Press Note issued by the Department of Industrial Policy and Promotion on Wednesday.

The earlier policy only talked about allowing 26 per cent FDI in the insurance sector without elaborating on what activities were covered under the cap and how FII and NRI investments were to be treated.

The UPA Government was keen on increasing the FDI cap in the insurance sector from 26 per cent to 49 per cent, but chance of it happening during the current tenure is slim.

The Insurance Bill, which proposes to raise FDI in the sector to 49 per cent, is unlikely to be passed in the Winter Session of Parliament which started on February 5. This session would be the last session of Parliament before the General Elections tentatively scheduled in mid-April.

India’s insurance regulator has set up a committee to study the option of allowing 100 percent FDI in insurance intermediaries, third-party administrators, surveyors and loss assessors. But action on this, too, would have to wait.

The companies bringing in foreign investment will have to obtain necessary licence from the Insurance Regulatory and Development Authority for undertaking prescribed activities.

Insurance brokers are entities which arrange insurance contracts with insurers or reinsurers on behalf of their clients.

The TPAs help in facilitating health insurance on behalf of insurers.

Surveyors and loss assessors provide technical services to the insurance companies.

(This article was published on February 5, 2014)
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