Indian Insurance Sector: ~₹54,000 Crore FDI Inflow in 9 Years

In the last 9 years, the insurance sector has received close to ₹54,000 crore as Foreign Direct Investment (FDI) on the back of additional liberalisation of overseas capital flow norms by the government.

FDI Inflow in the Indian Insurance Sector

Financial Services Secretary Vivek Joshi stated that the Indian government has increased the permissible FDI limit from 26% in 2014 to 49% in 2015 and then to 74% in 2021. And the permissible FDI limit for insurance intermediaries was raised to 100% in 2019. This resulted in approximately ₹54,000 crore of Foreign Direct Investment in insurance companies in the period of December 2014 to January 2024.

He further added that during the same period, the number of players in the insurance sector increased from 53 to 70. Insurance penetration grew from 3.9% in 2013-14 to 4% in 2022-23, while insurance density increased from USD 52 in 2013-14 to USD 92 in 2022-23.

To clarify, insurance penetration and density are two important metrics that are used to evaluate the level of development of the insurance sector in a country.

Insurance density is computed as the ratio of premium to population (per capita premium). Insurance penetration is calculated as the percentage of insurance premiums to GDP.

Asset Under Management (AUM) nearly tripled to ₹60.04 lakh crore as of March 31, 2023, against ₹21.07 lakh crore in 2013-14. The total insurance premium has more than doubled to ₹10.4 lakh crore as of March 31, 2023, from ₹3.94 lakh crore at the end of March 2014.

Zurich-Kotak Deal

In August 2000, the insurance sector in India was opened for private players, who were invited to register. Since then, many foreign companies have invested in the insurance sector in India. Notably, the latest Zurich Insurance-Kotak General Insurance deal in February 2024 could be one of the major FDI flows in the Indian insurance sector.

In February 2024, Zurich Insurance announced that it proposes to acquire a 70% stake in Kotak Mahindra General Insurance for ₹5,560 crore in a single tranche. In November 2023, Zurich entered the general insurance market in India through Kotak Mahindra Bank, where the bank announced the sale of 51% of its general insurance arm to Zurich Insurance for ₹4,051 crore. This acquisition was via a combination of fresh capital infusion and share purchase, followed by a 19% stake sale within a period of 3 years.

The proposed 70% acquisition would be subject to the fulfilment of customary conditions precedent, including the receipt of regulatory approvals from the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI).

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.