MUMBAI: Moody’s Ratings has said it sees significant foreign direct investment flows into the insurance sector if govt goes ahead with a proposal to increase foreign direct investment to 100% from 74%. This is coupled with improving margins for Indian insurers, brought about by govt pressure on public sector insurers, the listing of insurance companies, and the move toward newer tax rules.
“Many markets still do not allow 100% FDI in insurance. Wholly-owned subsidiaries give foreign companies more incentive to deploy more resources. Many foreign insurers already present through joint ventures could seek to increase their stake,” Mohammed Ali Londe, VP and senior analyst, told TOI.
According to Londe, govt’s decision to link capital infusion in public sector general insurance to underwriting profits has had a positive impact on the industry. He added that persistently weak prices in insurance suppress the sector’s profitability.
Another attraction for some foreign insurers would be the proposal to allow monoline insurers and composite insurance companies. “There are many insurers globally who focus on one line of insurance activity. They will be encouraged to come to India,” said Londe.
Londe said the listing of LIC and New India Assurance had increased the margins of the insurers. “We see these measures as credit positive. The state-owned insurers have considerable influence over market pricing but have historically prioritized gaining market share. As a result, they have tended to set prices at artificially low levels,” he said.
