Insurance bill will address listing issue: Shikha Sharma

With an increasing hope that government may accelerate reforms in the insurance sector with an increase in the foreign direct investment (FDI), what do experts think of the road ahead for the industry?

Shikha Sharma, Former MD and CEO of ICICI Prudential Life Insurance, said she was hopeful of insurance reforms now that a new government is in place. "The regulator and the ministry are very conscious of that. I am sure they will address that issue," she said. "If a listing is mandatory, it may mean proportional dilution by both promoters. It is not going to be dilution by one promoter at the cost of the other. However, there was also a debate whether the government will dictate the timing of the listing or the structure of the listing. So, I am sure the reform will address that question square on."

"The 49% is just an enabling provision. It will not be mandatory. It will depend on the mutual agreement or understanding between the foreign and the Indian partner," SB Mathur, Secretary General of Life Insurance Council (LIC), said. "The one element of legislation that requires companies to dilute shareholding especially for the Indian promoters within 10 years, that I think is being addressed in the reform, the new bill that is coming."

Q: The reform that is expected is primarily in the private sector insurance companies. One of the big things is that this 49% limit hike of foreign direct investment (FDI) in insurance appears to be on the cards. If that happens, what really will the terrain be? Do you really think this liberalisation is coming in a pace that private parties are not going to like?

Sharma: No, I think this has been something that the industry has discussed with the regulator in the past. The regulator and the ministry are very conscious of that. I am sure they will address that issue

If a listing is mandatory, it may mean proportional dilution by both promoters. It is not going to be dilution by one promoter at the cost of the other. However, there was also a debate whether the government will dictate the timing of the listing or the structure of the listing. So, I am sure the reform will address that question square on. I don't expect a situation where there would be an anomaly between the foreign promoter and the Indian promoter. So, I am sure that will be addressed.

Also read: Implications of hiking FDI limit in insurance: An analysis
Q: A similar question to you. That is the reform expected or rather the change in position expected that the FDI limit will be hiked to 49%. What are your comments on what might be the upshot?

Mathur: The 49% is just an enabling provision. It will not be mandatory. It will depend on the mutual agreement or understanding between the foreign and the Indian partner. The one element of legislation that requires companies to dilute shareholding especially for the Indian promoters within 10 years, that I think is being addressed in the reform, the new bill that is coming. Hopefully, it will be dictated by the business needs of the Indian and global partner.

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