Budget allows 100% FDI in intermediaries; FDI cap in insurers to be reviewed

Mrs Nirmala Sitharaman, India’s first full time woman finance minister, in presenting her first Budget to the Indian parliament last Friday, announced 100% foreign direct investment (FDI) will be allowed in insurance intermediaries. At present, the ceiling is 49%.Insurance intermediaries include insurance brokers, insurance repositories, surveyors and loss assessors, third-party administrators (TPA) as well as web aggregators.

In her two hour and fifteen minutes-long Budget speech Ms Sitharaman said, "The government will also examine suggestions for further opening up FDI in the aviation, media, and insurance sectors in consultation with stakeholders.”

At present, India allows 49% foreign ownership through the automatic route in insurance companies.

While Ms Sitharaman did not indicate any new limit on FDI, on earlier occasions the government had indicated that it was in favour of a cap of 74% on FDI in insurance companies

The Indian finance minister also proposed reducing the net owned fund (NOF) requirement for global reinsurers to INR10bn ($146m) from the present INR 50bn to attract international insurers find better risk pricing for the premiums offered.

“To facilitate onshoring of international insurance transactions and to enable opening of branches by foreign reinsurers in the International Financial Services Centre, it is proposed to reduce net owned fund requirement from INR50bn to INR10bn,” Ms Sitharaman said.