Government mulls 100% FDI in insurance broking

MUMBAI: The government is considering exempting insurance intermediaries, including brokers, from the foreign direct investment limit. Although caps on insurance intermediaries were not originally envisaged, the insurance regulator had at some point decided to apply the limits applicable to insurance firms to other companies across the sector.

The rethink comes at a time when the government has allowed reinsurance firms to set up 100 per cent-owned units in the form of domestic branches. Several of the international brokers are keen to follow their clients in India but are not interested in a minority-stake company.

The complication that the FDI limit is creating on regulation is that foreign banks allowed to distribute insurance as brokers or corporate agents end up breaching the caps.

Berkshire Hathaway had set up a wholly owned company for distribution of motor insurance some years back but subsequently the Insurance Regulatory and Development Authority of India (IRDAI) decided that even corporate agents should be subject to the FDI limits. Now, the thinking is to go back to the original stance of allowing 100 per cent ownership.

The other reason for considering 100 per cent FDI for broking firms is that insurance broking is not a capital-intensive business and most of the work is advisory in nature. Even if the premium is sourced by a multinational broking firm, the policy is issued by a domestic insurance company and there is no loss of foreign exchange.

At present, most of the top international broking firms are present in India. These include Aon, Marsh, Howden and JLT. Willis, which had exited from a joint venture earlier, is re-entering the market through an equity stake in Almondz.