MUMBAI (TIP): The Insurance Laws (Amendment) Bill has been hanging fire since 2008. Several global insurers have since gone bust and many have shrunk their empires. Companies such as UK’s Standard Life and Aviva are a pale shadow of what they were at the turn of the century when they entered into joint venture partnerships even as the Indian ventures have grown.
While almost all insurers initially offered their Indian partner the right of first refusal, the larger companies such as ICICI, HDFC, SBI and the Birlas have made it clear that any stake sale will take place at market value. In several cases, the foreign partners are in a capital conservation mode and domestic partners are likely to turn to private equity investors to get a better price. Also, a small stake sale to a private equity investor helps the joint venture partner in price discovery. Industry officials say that up to Rs 62,000 crore of fresh capital will flow in by way of equity investment in life, health, non-life companies and other intermediaries in the insurance sector.
For the non-life industry, the immediate impact would be creation of additional underwriting capacity with more capital coming in and reinsurers opening branches.
“Within the next one month, we will be coming out with norms on registration of companies with 49% stake. Norms for registration of reinsurance branches is also something that we will come out soon as there are a number of companies that want to open a branch. Lloyds of London also wants to open a branch. We are coming out with norms on nomination and flexibility in assignment. Some of the other issues we will keep them for discussion before coming out with the regulations or guidelines,” said IRDA chairman T S Vijayan.
Smaller private companies with stronger foreign partners might now try and acquire companies to build scale. This bill holds more potential to jumpstart the sector on a long sustainable basis. There would be all-round impact across new players, deeper capital, top-line growth and focus on technicals. Value unfolding may also take place through IPOs, consolidation and other possible routes,” said Anuraag Sunder, managing consultant, Financial Services, PwC India.