Removing 74% FDI cap may benefit insurers more: Chairman

This could remove the need for joint ventures, but int’l insurers may still favour local partnerships.

The Indian insurance sector is experiencing a rise in mergers and acquisitions (M&A) driven by regulatory changes, evolving consumer demand, and increased interest from international investors, according to a joint analysis by the Confederation of Indian Industry (CII) and KPMG.

The report comes after the Indian government’s push for universal insurance coverage under its "Insurance for All by 2047" program, which leverages digital tools, simplified claims processes, and targeted products for underserved populations.  

The liberalisation of foreign investment regulations has played a critical role.

Zurich Insurance Group’s recent acquisition of a 70% stake in Kotak Mahindra General Insurance for $488m is a key milestone, marking the first control deal under the updated rules allowing increased foreign ownership. 

The transaction underscores global insurers’ confidence in India’s growing insurance market, which remains underpenetrated.  

The Insurance Regulatory and Development Authority of India (IRDAI) is pushing for reforms to further open the sector to foreign investment. 

Chairman Debasish Panda has advocated removing the current 74% foreign direct investment (FDI) cap, potentially allowing 100% foreign ownership. 

Whilst this would eliminate the need for joint ventures, many international players may still prefer local partnerships to leverage domestic expertise and networks.  

However, challenges remain. The Foreign Exchange Management Act (FEMA) mandates that transactions in unlisted securities occur at fair market value, restricting pricing flexibility for phased ownership transitions or other strategic arrangements. 

Easing these rules would align India’s regulatory framework with global norms and improve the appeal of its insurance sector to foreign investors.  

IRDAI has also urged insurers to consider stock market listings, which enhance transparency, governance, and access to capital.