{"id":14458,"date":"2021-03-19T00:00:00","date_gmt":"2021-03-19T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/19-03-2021\/fdi-limits-in-insurance\/"},"modified":"2021-03-19T00:00:00","modified_gmt":"2021-03-19T00:00:00","slug":"fdi-limits-in-insurance","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/19-03-2021\/fdi-limits-in-insurance","title":{"rendered":"FDI limits in Insurance"},"content":{"rendered":"<p><strong>In News:<\/strong> Insurance Amendment Bill 2021 has been recently passed by Rajya Sabha.<\/p>\n<p><strong>Key Provisions of Insurance Amendment Bill 2021<\/strong><\/p>\n<ul>\n<li><strong>Foreign investment:<\/strong>\n<ul>\n<li>Increases the maximum foreign investment in an insurance company <strong>from 49% to 74%<\/strong>.<\/li>\n<li>Enables \u201c<strong>control and ownership<\/strong>\u201d by foreign investors.<\/li>\n<li>However, such foreign investment may be subject to additional conditions as prescribed by the central government.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Investment of assets:<\/strong>\n<ul>\n<li>The Act requires <strong>insurers to hold a minimum investment<\/strong> in assets which would be sufficient to clear their insurance claim liabilities.<\/li>\n<li>If the insurer is <strong>incorporated or domiciled outside India<\/strong>, such assets must be held in India in a trust and vested with trustees who must be residents of India.<\/li>\n<li>The Bill removes the explanation given in previous Act that this will also apply to an insurer incorporated in India, in which at least:\n<ul>\n<li>33% capital is owned by investors domiciled outside India, or<\/li>\n<li>33% of the members of the governing body are domiciled outside India.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Section 27(e):<\/strong> \u201cNo insurer shall directly or indirectly invest outside of India the funds of Indian policy holders.\u201d<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>Benefits<\/strong><\/p>\n<ul>\n<li><strong>Greater Competition:<\/strong> FDI would mean greater competition and thus better negotiated premiums for the end user.<\/li>\n<li><strong>Policy holder\u2019s money is safe:<\/strong> The policy holder\u2019s money can not leave Indian Shores and need to be compulsorily invested in India only as per Section 27(e).<\/li>\n<li><strong>New Employment Opportunities:<\/strong> The public sector insurance firms employ only over 7 lakh persons while the private sectors have more than 23 lakh employees and agents.\n<ul>\n<li>Since the sector was opened up in 2000 by allowing 26% FDI, there has been a growth in the number of companies, insurance penetration and jobs.<\/li>\n<li>In 2015, another amendment hiked the FDI limit to 49%which resulted in ?26,000 crore foreign investment and 12 new insurance firms in the last 5 years.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Indian Management:<\/strong> As the key management will be Indian, the applicability of India laws is byond any doubt.<\/li>\n<li><strong>Broad consultation with Stakeholders:<\/strong> The Insurance Regulatory and Development Authority (IRDA) had consulted 60 firms and other private players over the bill.<\/li>\n<\/ul>\n<p><strong>Criticism<\/strong><\/p>\n<ul>\n<li><strong>Not sent to Standing Committee:<\/strong> Standing committee is a place for non political and balanced discussions about any bill.\n<ul>\n<li>The bill is being passed in a hurry without enough deliberations.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Contrasts AtmaNirbhar Bharat:<\/strong> Allowing foreign control and ownership is in contrast to promotion of domestic especially when there is no shortage of capital in big insurance firms of India.<\/li>\n<li><strong>Not successful in the past:<\/strong> None of the insurance firms has managed to get FDI even up to the present limit of 49%.<\/li>\n<li><strong>Grand clearance sale of National Assets:<\/strong> As per the opposition, this much high impetus on privatisation is detrimental for nation and Public assets built assiduously over the years.<\/li>\n<li><strong>Undermine Policy of Reservation:<\/strong> Greater control of foreign firms would also mean that the policy of reservation will be undermined.<\/li>\n<li><strong>Foreign Firms may flee in case of Bankruptcy:<\/strong> The foreign firms are often not subjected to Indian Laws and Regulations. Hence, their fleeing may put Indian Investments and policies at risk.<\/li>\n<\/ul>\n<p><strong>Way Ahead<\/strong><\/p>\n<ul>\n<li><strong>Involvement of the Standing Committee:<\/strong> In democracy, debates are used to build consensus. The standing committee will help the government to make more rational decisions.<\/li>\n<li><strong>Enough Safeguards to avoid escape of Defaulters:<\/strong> The defaulters like Vijay Malya and Mehul Chowksy have escaped despite being an Indian and hence such loopholes must be plugged.<\/li>\n<\/ul>\n<p><strong>Source:<\/strong><a href=\"https:\/\/www.thehindu.com\/news\/national\/parliament-proceedings-bill-increasing-fdi-limit-in-insurance-sector-passed-by-rajya-sabha\/article34101456.ece\" target=\"_blank\" rel=\"noopener\"><strong>TH<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News: Insurance Amendment Bill 2021 has been recently passed by Rajya Sabha. Key Provisions of Insurance Amendment Bill 2021 Foreign investment: Increases the maximum foreign investment in an insurance company from 49% to 74%. Enables \u201ccontrol and ownership\u201d by foreign investors. However, such foreign investment may be subject to additional conditions as prescribed by [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":14459,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[26,46],"class_list":["post-14458","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-gs-3","tag-indian-economy-related-issues"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/72749666268277current-affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/14458","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=14458"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/14458\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/14459"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=14458"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=14458"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=14458"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}