The government is planning a red carpet welcome for the world?s biggest insurer Lloyd?s to set shop in India. It is considering amending the Insurance Act to remove the legal hurdles that prevent the India foray of the London-based society of underwriters that handled gross premiums worth over ?21.97 billion in 2009.
Currently, for an insurer to do business in India, it has either to be an Indian insurance company itself or a foreign company in joint venture with an Indian firm, subject to the 26% FDI cap in the sector. Lloyd?s could not use this route to enter India as it is not a company but a society of underwriters. Sources said the current provision in the Insurance Act which defines a ?foreign company? as one that is not a ?domestic company? would be changed to ?a company or body established or incorporated under a law of any country outside India.? This would facilitate Lloyd?s entry.
Tata AIG, Max New York, Max Bupa, Bajaj Allianz are the insurance firms in India in which foreign players are involved.Sources added the government was also considering permitting overseas re-insurance companies to open branch offices in India with a minimum net worth of Rs 5,000 crore.
?Heath Insurance? would also be included in the Act and the minimum capital requirement for an exclusive health insurer would be pegged at Rs 50 crore. The proposals were discussed at a meeting between commerce and industry minister Anand Sharma and US commerce secretary Gary Locke on Monday. Locke wants the Indian government to take more steps to open its economy, particularly in dealing with trade barriers.
Other issues discussed at the meeting involved opening up the retail sector, easing entry of foreign banks in India and raising the FDI cap in the insurance sector. As far as the banking sector is concerned, the government has conveyed that it has postponed reviewing policy on foreign banks in India. The policy initiatives under the road map prepared in 2005 included according full national treatment to wholly-owned subsidiaries of foreign banks after 2009.
This also included permitting wholly-owned subsidiaries of foreign banks to list and dilute their stake and acquire private Indian banks. However, the government clarified that the proposed review would be taken up when there is greater clarity regarding stability and recovery of the global financial system. On allowing FDI in multi-brand retail, Sharma conveyed to his US counterpart that opening FDI in retail can be linked to bringing in technology and management know-how for setting up efficient supply chains, which can act as models of development. He pointed out that without addressing the gaps in the value chain, organized retail will neither be profitable nor make any great difference to the economy.
As per industry estimates, 25-30% of fruits and vegetables and 5-7% of food grains in India are wasted. Though FDI is permitted in the cold chain, the country has not been able to garner investments due to no FDI in retail.