NEW YORK: US insurance companies, which have been lobbying the government for an increase in the overseas investment limit for more than a decade, are worried that a clause in the Insurance Bill to facilitate this related to management and control may hamper the initiative.
Prime Minister Narendra Modi is expected to highlight his government's initiative to raise the foreign direct investment ceiling in the insurance sector to 49% from 26%, when he makes his pitch for fresh investments from US financial industry giants.
"We are very pleased that the Modi administration has prioritised the Insurance Bill that aims to raise the foreign investment cap in insurance companies," said Susan Greenwell, vice-president, international government relations at the $500-billion New York-based insurer Met-Life, which has a joint venture with Punjab National Bank in India. "We have been promoting this idea for a decade now and we believe that raising the FDI cap will help bring in long-term capital to finance growth in the industry."
But she expressed concern about the Insurance Bill introduced in Parliament by the NDA government that mandates insurers must have "Indian management and control".
"On management control, we are interested to understand the new phrase in the draft legislation. We believe that any onerous definition of control could dampen the flow of FDI in the country," she told ET in an exclusive interview.
A number of industry groupings are raising the issue with the select parliamentary committee that is examining the bill, she said.
A senior official looking after emerging markets at another American insurance firm told ET that issues such as management and control have already been well-defined in India's Companies Act and the regulations framed by the Securities and Exchange Board of India.
"I don't see any reason why the insurance law needs to define this afresh," the executive said on condition of anonymity as he's not authorised to speak to the media without prior approval.
Greenwell said the Insurance Regulatory and Development Authority (Irda) is also expected to raise the issue with the parliamentary panel. The clause could prevent Indian private insurers from appointing CEOs of foreign origin.
She also called for more clarity on Irda's approach to regulation. "Any industry is looking for stability and predictability on regulatory issues to have confidence for growth. It's the same with insurance as well," she said.
Metlife, founded in 1868 and America's largest life insurance firm with operations in more than 50 countries, believes the higher FDI ceiling will lead to increased competition and greater choice for the customer.
More FDI flows would improve the penetration rate for insurance products in India which is low in a market that has no comprehensive social security, said Greenwell. She said this would create jobs and boost investment in long-term assets such as infrastructure.