Four public general insurance companies -- New India Assurance Company, National Insurance Company, Oriental Insurance Co and United India Insurance Co -- are gearing up for listing.
The announcement to this effect was made in the budget this year. A Cabinet note has been circulated and post approval, they will go for the listing.
In the private space, the largest life insurer ICICI Prudential became the first such player to get listed on stock exchanges. It generated much investor interest in the first-ever public offer in the insurance space in 16 years after it was opened to private players.
With regard to consolidation in the insurance sector, the first successful deal that fructified is that of HDFC Ergo General Insurance, promoted by Housing Development Finance Corporation, acquiring L&T General Insurance for Rs 551 crore.
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It was followed by announcement of the merger of HDFC Life with Max Life in a transaction valuing the merged entity at Rs 67,000 crore. Although the decision has led to the regulator flagging concerns about the complex structure, it is likely that the deal will be completed sooner than later.
In short, it has been a dynamic year for the industry which saw some large players consolidating as well as listing on national bourses, given the new regulations.
"We expect the action to continue in the sector. The industry does offer immense scope for consolidation as some promoters may look at exiting non-core businesses and existing large insurers desire to achieve scale and bring in better synergies in expenses to pass on cost efficiencies to the customer and shareholder," said Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance.
Foreign investment in the insurance space that continued in 2016 is expected to keep its momentum in the coming year as well, but the quantity would moderate.
For example, Nippon Life Insurance of Japan invested Rs
2,265 crore to increase its stake in Reliance Life Insurance to 49 per cent from 26 per cent while Canada-based Sun Life Financial pumped in money to raise its holding in Birla Sun Life Insurance by buying shares worth Rs 1,664 crore.
The latest in the series is SBI Life selling 3.9 per cent to KKR & Co and Singapore Temasek Holdings for Rs 1,800 crore. The announcement came earlier this month.
As far as the reinsurance sector is concerned, regulator Irdai has given preliminary nod to five foreign players as part of the elaborate licensing process.
The five reinsurers that got approval -- known as R2 -- are believed to be Swiss Re, Munich Re, Hannover Re, French major SCOR and Reinsurance Group of America.
However, the demonetisation drive came as a bolt from the blue which somewhat affected the pace. The assessment is this is momentary and things will be back on track.
"The demonetisation drive has created disruption and while it is too early to say, it may be possible that this creates multiple opportunities for the insurance sector," said R M Vishakha, MD and CEO, IndiaFirst Life Insurance.
According to Apollo Munich Health Insurance MD, Antony Jacob, investments in financial instruments are expected to grow next year with demonetisation.
"At this juncture, we would request the government and the regulator to enable policies to help fuel long-term growth for the sector. We would request the GST Council to consider the administrative issue and allow centralised registration of taxes," Chug said.
"Life insurance is equivalent to a social security measure and a lower tax rate and additional benefits under the Section 80C will help the sector as well."
Based on the final provision of GST, we may see a change in premium rates in the coming year, Vishakha said.