REINSURERS TO GET EASIER ENTRY

New Delhi: The insurance amendment bill, slated to be vetted by an empowered group of ministers soon, has been reworked considerably with changes in listing norms and relaxation in prescribed norms for reinsurance companies. The bill seeks to increase the foreign direct investment (FDI) limit in the insurance sector to 49%. Foreign reinsurance companies are likely to be allowed to set up branch offices here without entering into joint venture partnership with Indian firms. The government would also work out a favourable tax structure for such companies. The government may relax the norms related to mandatory listing of all insurance companies within 10 years of their operations as the clause is being termed as impractical. “For listing purposes, companies need profitability for at least three consecutive years. It would be impractical to force any company to shut operations if they do not attain profitability for a certain period, so the clause needs to be amended,” an official source said. The government would, however, make it mandatory for all the companies to get registered as public limited entities within one year of the Act comes into place. The group of ministers (GoM) is likely to meet later this week or early next week to take a final call on all the issues. “We may allow the foreign reinsurers to set up their independent branch offices in India,” an official in the finance ministry said. The new entrants would have to show a net owned asset of about Rs 5,000 crore to start operations. “We are still working on the exact amount of net owned asset to be stipulated for such companies,” the official said. This amount would be periodically revised also. Presently General Insurance Company (GIC) is the only reinsurer in the country. The company had a net owned fund of Rs 4,822 crore as on March 31, 2006. Global asset base of GIC as on March 31, 2006 stood at Rs 27,038 crore. Entry of foreign players in the reinsurance segment would benefit the general, life and health insurance companies who would be able to negotiate better premium. With the passage of the proposed amendment, foreign companies including Lloyd’s of United Kingdom (UK), can set up its branches in the country.

Source: The Economic Times