Insurance amendments pave way for higher FDI in pensions sector

NEW DELHI: The passage of the Insurance Bill in Parliament will also open the door for up to 49% foreign investments in the pensions sector as its FDI limit is pegged to that in the insurance industry. The amendment to the insurance law will also let the four state-owned general insurance companies raise funds.

Section 24 of the Pension Fund Regulatory and Development Authority ( PFRDA) Act provides that the foreign investment limit in the pension sector will be linked with the ceiling in the insurance sector, which has gone up to 49% from 26%. According to the General Insurance Business (Nationalisation) Act, 1972 (GIBNA, 1972) the four general insurance companies (GICs) had to be 100% government owned.

The Insurance Laws (Amendment) Bill, 2015 — passed by the Rajya Sabha on March 12 and by the Lok Sabha on March 4 — will change that. The GICs “are now allowed to raise capital, keeping in view the need for expansion of the business in the rural and social sectors, meeting the solvency margin for this purpose and achieving enhanced competitiveness subject to the government equity not being less than 51% at any point of time,” the finance ministry said in a statement. The amendment also clearly defines health insurance business to include travel and personal accident cover.