India's Insurance Sector Clocked FDI Worth Rs 53,900 Crore In 9 Years, Says Financial Services Secretary

The official said that this growth in investment in the sector was aided by enhanced liberalisation of overseas capital flow norms by the government

The number of insurance players during the nine year period jumped from 53 to 70, while insurance penetration grew from 3.9 per cent in 2013-14 to 4 per cent in 2022-23.

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The insurance sector clocked foreign direct investment worth nearly Rs 54,000 crore in the last nine years, Financial Services Secretary, Vivek Joshi said. The official said that this growth in investment in the sector was aided by enhanced liberalisation of overseas capital flow norms by the government. 

Speaking with PTI in an interview, Joshi said that the government raised the FDI threshold from 26 per cent in 2014 to 49 per cent in 2015 and then further to 74 per cent in 2021. He noted that the allowed FDI limit for insurance intermediaries was raised sharply to 100 per cent in 2019. This resulted in the insurance companies receiving FDI worth Rs 53,900 crore during the December 2014 and January 2024 period. 

The official noted that market penetration also increased during the period under review. The number of insurance players during the nine year period jumped from 53 to 70, while insurance penetration grew from 3.9 per cent in 2013-14 to 4 per cent in 2022-23. At the same time, insurance density climbed from $52 in 2013-14 to $92 in 2022-23. 

Notably, the growth of the insurance sector in a nation is determined by certain factors, insurance penetration and density being the primary ones. The insurance penetration is calculated as the percentage of insurance premium to GDP, while insurance density is measured as the ratio of premium to population. 

The asset under management during the period grew by almost three times to Rs 60.04 lakh crore, against Rs 21.07 lakh crore in 2013-14. The overall insurance premium also climbed to Rs 10.4 lakh crore from Rs 3.94 lakh crore as of March end 2014. 

The insurance industry opened its door to private players in August 2000, inviting applications for registrations. The foreign entities were also permitted to control ownership of up to 26 per cent. Ever since then, the report noted that several foreign firms have invested in the insurance sector.

One major FDI inflow in the sector happened recently when the deal between Zurich Insurance and Kotak General Insurance took place. In November 2023, Kotak Mahindra Bank announced the sale of a majority 51 per cent share in its general insurance wing to Zurich Insurance for Rs 4,051 crore, to be followed by a 19 per cent share sale in a period of 3 years. Last month, Zurich Insurance informed that it plans to buy a 70 per cent share in the Kotak Mahindra General Insurance in a single tranche for Rs 5,560 crore. The acquisiton remains subject to regulatory approvals.