Foreign insurance companies from Asia, Canada and Europe are said to be hesitant about entering the Indian market three years after the insurance law was amended to allow a higher foreign investment limit in insurance companies in the country.
Foreign investors are reportedly deterred by a requirement for Indian management control for all domestic insurance companies.
Despite multiple requests from interested foreign partners, sources said that the government will not be loosening the rules on this front, reports Moneycontrol.
The Insurance Laws (Amendment Bill) 2015 was passed in March 2015, increasing the foreign direct investment ceiling n an insurance company from 26% to 49%. But there is a caveat that insurance companies in India must have Indian management control.
"When we put in adequate capital and take a 49% stake in an insurance company, we would also like to get decision-making powers on an equal footing. Without that, the investment does not make business sense," said a senior executive of an Asian insurance major that was in talks to form a joint venture in India.
Sources told Moneycontrol that at least three insurers had approached the central authorities in recently, seeking clarification on the Indian management control rules. However, they were told that no tweaks will be made.
Soon after the Insurance Act was amended in 2015, there were reports of how the Indian insurance market would receive at least millions in funds over the next six to eight months from foreign insurers seeking to set up ventures in the country. Reports were that two insurers from South East Asia, one from Canada and two from Europe were leading the queue in 2015. So far, none of them has set foot in the Indian market.