KUALA LUMPUR, Feb 3 — AM Best views the revision of India’s foreign investment cap from 49 per cent to 74 per cent as an opportunity for significant capital inflow into the country’s fast-developing insurance market.
AM Best in its Best’s Commentary, ‘India Insurance Market to Benefit From Increase in Foreign Investment Limit’, states the increase will allow Indian insurers greater financial flexibility in additional capital-raising, and over time, is expected to support a bolstering of the industry’s solvency.
Aside from the government’s mandate for control of the companies to remain with resident Indian citizens, which may be a limiting factor for foreign insurers looking to hold majority interest, a specified percentage of profits is also to be retained as a general reserve.
This will contribute to the strengthening of companies’ capital positions, according to a statement from the global credit rating agency.
AM Best is of the opinion that the Indian insurance industry is likely to attract significant overseas capital, which is crucial to strengthening the solvency of the overall industry, particularly for the general insurance companies, which recorded declining capital buffers over the last few years.
The raised foreign direct investment cap should also enable insurers to expand underwriting operations further, which will contribute to growing the insurance penetration in the country.
More details at www.ambest.com.
— BERNAMA
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