Mumbai: The government decision to remove the foreign-ownership cap on insurance intermediaries is likely to increase competition, strengthen distribution capabilities to enhance insurance penetration and boost M&A in the medium to long term.
According to Fitch Ratings more international companies are likely to enter the fast-expanding Indian market. The proposal comes at time when
other countries in the region are planning to lift restrictions on foreign ownership in their insurance markets.
The government of India proposed on July 5 to permit foreign companies to own up to 100 per cent of insurance intermediary companies, including insurance agents, brokers, loss assessors and surveyors, from the 49 per cent, to attract more foreign direct investment into the industry.
The proposed change is only applicable to insurance intermediaries while the cap on foreign ownership in insurance companies will remain at 49 per cent. Still, the government has indicated that it may take further measures to open up the insurance market to foreign investors. This could include the relaxing of foreign ownership restrictions on insurance companies.