At present, overseas companies can hold up to 49 percent stake in insurance firms, which could be increased to 74 percent.
Share prices of insurance companies rallied 2-8 percent in the morning trade on December 10 after a media report said that the government may raise the foreign direct investment (FDI) limit in the sector.
HDFC Life Insurance Company, SBI Life Insurance Company and ICICI Prudential Life Insurance Company gained more than 2 percent each, while General Insurance Corporation of India climbed 4 percent and New India Assurance Company rose 7.8 percent.
"The government may raise the overseas investment limit in insurance to 74 percent in the February budget, up from 49 percent now, possibly paving the way for foreign control of companies," The Economic Times quoted people with knowledge of the matter as saying.
The Insurance Regulatory and Development Authority of India (IRDAI) sought the views of stakeholders in a December 2 letter on the direction of the government. The letter, to insurance companies and others, has called for suggestions on raising the FDI limit, the report said.
The government had in September increased the FDI limit in insurance intermediaries to 100 percent.
Meanwhile, the industry’s annual premium equivalent (APE) growth surged 62 percent in November 2019 against 2 percent in the same month last year.
LIC posted 107 percent YoY APE growth during the month, while private players recorded growth of 26 percent YoY. Among leading private insurers, HDFC Life posted a 44 percent growth, while ICICI Prudential saw a 6 percent YoY decline in APE.
On unweighted New Business Premium (NBP) basis, the industry grew 76 percent YoY in November, led by robust growth in LIC (97 percent YoY), well-supported by private players (39 percent YoY), said JM Financial.
LIC expanded APE market share to 56 percent (up, 1,230 bps YoY) in November. IPRU and SBI Life were the major private players seeing market share eroded to 7 percent (down, 500 bps YoY) and 9.5 percent (down, 320 bps YoY), respectively, during the month.
JM Financial expects industry APE CAGR of 16 percent over FY19-21 driven by a) low penetration, b) omni-channel becoming the norm, and c) reduced competitive intensity from other saving products in a low interest rate environment.
At 1021 hours, HDFC Life Insurance was up 0.96 percent at Rs 577.95, SBI Life up 1.88 percent at Rs 963 and ICICI Prudential Life up 1.09 percent at Rs 495. General Insurance Corporation of India was trading 2.50 percent higher at Rs 248.20 and New India Assurance Company was at Rs 141.30, up 6.88 percent.
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