26% Cap Stipulated By IRDA For FII And NRI Investments

Insurance sector has recently received the latest foreign investment norms from the government. It has illustrated the four major areas which would initiate investment and also restricted the cap at 26% for the automatic route. The earlier insurance policy focused only on the insurance sector not over any investment. Now, the new guidelines are more comprehensive specifying the four sectors i.e. insurance brokers, third party administrators, surveyors and loss assessors and insurance companies. It will also consider insurance related foreign direct investments.

A press note was issued by the Department of Industrial Policy and Promotion (DIPP) which stated permission for the investment through Foreign Institutional investments (FIIs), Non-Resident Indians (NRIs) and Foreign Direct Investment (FDI), but, under the cap of 26% established for insurance sector.

As per the Finance Ministry, the FDI policy is to remain the same with no new addition of guidelines and it is just a clarification process occurring in this case. PWC, Executive Director Akash Gupt said that it is just the merging of the current policy provision where the insurance law and Insurance Regulatory Regulations have same caps for investments by FII, FDI and NRI.

A license from the Insurance Regulatory and Development Authority (IRDA) is required for performing prescribed activities, esp. the companies which bring in foreign investment should obtain this.

Arranging insurance contracts with reinsurers or the insurers on behalf of the client, the insurance brokers are the individuals who take care of the remuneration. IRDA believes that the TPAs are a big help for insurers as they assist them with health insurance. Insurance companies are offered with technical services by surveyors and loss. While IRDA stipulated the norm of keeping the cap within 26%, Arvind Mayaram’s committee had recommended for keeping a cap of 41% (for composite FDI) for the insurance sector.