The increase in the foreign direct investment (FDI) limit in the insurance sector might attract Rs 30,000 crore that the industry requires over the next five years, the Insurance Regulatory and Development Authority (Irda) has said.
A day after the Centre announced its decision to allow up to 49 per cent FDI in insurance, Irda Chairman J Hari Narayan said the move was essential as inflows are necessary for the sector to grow at 11 to 12 per cent yearly. “It (the FDI) will give a boost to the sector. And it is required any way. Otherwise, we don’t have required capital for the insurance sector,” he told PTI. “If the insurance sector has to double, then it would require at least Rs 30,000 crore (in the next five years),” he added.
The decision was taken by the Union Cabinet yesterday. The government also gave the green signal to foreign investment in pension funds, saying the FDI limit could go up to 49 per cent in line with cap in the insurance sector. According to Irda, the sector constitutes around 4.5 per cent to the gross domestic product (GDP). Last year, the total premium collected was Rs 2.83 lakh crore.
With the increase in the FDI limit, the percentage of contribution from the sector to GDP might also go up, he said. “This will also increase the sector share in GDP. If GDP also rises, then the percentage may remain marginally high,” he said.
The premium income of the general insurance industry, comprising 21 private and four public sector insurers, stood at Rs 27,942 crore in the first five months of the current financial year. It was 18 per cent higher than Rs 23,748 crore in the corresponding period in 2011-12. However, the premium income of life-insurance industry declined 15 per cent to Rs 34,358 crore in the first five months of the current financial year, compared with Rs 40,654 crore in the same period last year.
