India's insurance sector attracted Rs. 54,000cr FDI since 2014
Over the past nine years, India's insurance sector has seen a significant influx of foreign direct investment (FDI), totaling nearly Rs. 54,000 crore. This surge is largely due to the government's liberalization of overseas capital flow regulations. Financial Services Secretary Vivek Joshi confirmed this trend, noting that the permissible FDI limit was increased from 26% in 2014 to 49% in 2015 and further to 74% in 2021.
Insurance intermediaries enjoy full FDI limit
Alongside the raised FDI limit for insurance companies, the government also expanded the permissible FDI limit for insurance intermediaries to a full 100% in 2019. These policy shifts have resulted in insurance companies receiving Rs. 53,900 crore from foreign investors between December 2014 and January 2024. During this time frame, the number of entities operating within the insurance sector grew from 53 to an impressive 70.
Positive growth trends for insurance penetration and density
The insurance sector has experienced encouraging growth in terms of penetration and density—two crucial indicators of sector development. As per Joshi, insurance penetration rose from 3.9% in fiscal year 2013-2014 to 4% by 2022-2023. Concurrently, insurance density saw an increase from $52 per capita premium in 2013-2014 to $92 per capita premium by 2022-2023.
Assets and premiums soar within the insurance sector
Financial metrics within the insurance sector have also seen a remarkable upswing. Assets Under Management (AUM) nearly tripled, soaring from Rs. 21.07 lakh crore during the 2013-2014 fiscal year to a whopping Rs. 60.04 lakh crore. Similarly, total insurance premiums have more than doubled, rising from Rs. 3.94 lakh crore as of March 2014 to the current figure of Rs. 10.4 lakh crore.
Zurich Insurance-Kotak deal: A significant FDI milestone
The Zurich Insurance-Kotak General Insurance deal stands out as a significant milestone in FDI flow within the Indian insurance sector. Zurich Insurance has proposed to acquire a 70% stake in Kotak Mahindra General Insurance for Rs. 5,560 crore. This follows Kotak Mahindra Bank's announcement in November 2023 of the sale of a majority stake of (51%) in its general insurance arm to Zurich Insurance for Rs. 4,051 crore. The proposed acquisition is pending regulatory approval from relevant authorities.
