Govt. allows FIIs, NRIs to invest in insurance sector
The Union Government has allowed 26% foreign investment in insurance sector in activities related to insurance viz. broking, Third Party Administrators (TPAs) and surveyors and permitted Foreign Institutional Investors (FIIs) and Non-Resident Indians (NRIs) to also invest in insurers within the stipulated cap.
The Department of Industrial Policy and Promotion (DIPP) stated that in case of insurance, the 26% cap will include FDI and investments from FIIs and NRIs.
(Earlier, only FDI under the automatic route was allowed in insurance companies.)
Apart from insurance companies, the relaxation would apply to insurance brokers, third-party administrators (TPAs), surveyors and loss assessors. All of this investment can be made under the automatic route.
- Insurance brokers are entities which for remuneration 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.
- All these entities are required to obtain a licence from the Insurance Regulatory and Development Authority (IRDA) for undertaking specific activities.
The Arvind Mayaram Committee on definition of FII and FDI, in its draft report, recommended composite caps whereby FDI, FII and NRI investments would form part of the total cap on foreign investments.
Note: The Insurance Act, 1938 does not stipulate any FDI limits for insurance intermediaries or TPAs, but sector regulator IRDA has restricted it to 26%.
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Month: Current Affairs - February, 2014