New insurance draft Bill goes to Cabinet this month

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New Delhi, Sep 5: has grown five times in the last six years since private players were allowed in. Analysts expect an increase in the FDI limit to bring in around $4 billion of ‘sticky’ foreign investment in existing ventures as well as speed up the entry of big players like All State , Nationwide and Samsung, who have been actively looking for Indian partners.

Reinsurers like Lloyds of London, which has only recently recalled its India representative after giving up on insurance reforms, and Munich Re are also expected to be able to enter the Indian market once the Bill becomes a law of the land.

With insurance penetration in the country still at only 4% of Gross Domestic Product (GDP), there is still a lot of scope for expanding the insurance pie. Moreover, with the business for private players growing at a brisk 60-70% in past few years, the need for capital infusion has become acute.

While Indian partners in insurance joint ventures would be keen to offload 23% of their stakes to the foreign partners and invest the funds in their core businesses, not all foreign insurers may bring in capital readily. This is because the global financial crisis triggered by the US sub-prime mortgages market has hit insurers along with banks, asset management companies and hedge funds. Big global insurance players have taken a $77 billion hit on their books since the crisis began last year.