Washington: Describing the passage of India's Insurance Bill - that raises the FDI cap to 49 per cent - as a "substantial step", an influential US insurance organisation has lauded the new government for going ahead with the economic reforms and infusing new energy.
"The ability of the government to build a coalition of support for the bill demonstrates clearly that a new energy has infused the government of India," Stephen M Simchak, director, International Affairs of the American Insurance Association (AIA) told the US International Trade Commission during an investigation hearing on India on Tuesday.
"By demonstrating its commitment to economic growth through the insurance sector, among others, the government made it clear that they can and will reform India's economy for the benefit of India's citizens," Simchak said.
Noting that it is too early to say with quantitative certainty what the impact of the insurance reforms will be, he said, early predictions have indicated that it will be big, and it will be good.
"We expect that the passage of the amendments will have a very positive effect for US insurers, other non-Indian insurers, and the insurance policyholders of India," he said while reflecting the view of the US private insurance sector, which is looking forward to invest majorly in India after passage of the bill.
Predictions from insurance groups and independent economists have put new FDI inflows to India from the investment cap increase anywhere from USD 2 billion to USD 10 billion.
"India has taken an substantial step toward reducing trade and investment barriers in the insurance sector, and has done so through the impressive dedication of the new government to positive economic reform," Simchak said.
He said he expected that the increase in the investment cap will also attract new market entrants.
When new insurers enter the market it will increase total capital in the sector, he said, adding as the Indian insurance sector continues to develop, it is likely that the existing joint venture partners - both
Indian and non-Indian - will increase the size of their investments in the joint ventures and increasing the available capital.
Noting that getting to 49 per cent was a long, politically -fraught process, Simchak said it was clear that the new government understands the importance of a more-developed insurance market.
"For the same reasons, 74 per cent or 100 per cent should be the goal for the benefit of Indian policyholders and US insurers alike. The improvements that we expect to come from the increase to 49 per cent will be even greater if insurance companies are permitted to be wholly owned by non-Indian insurers," he added.
Opening of India's reinsurance market to foreign branches is another very significant development that came from the insurance legislation, Simchak said.
