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Insurance & Reinsurance
India
It was recently confirmed that an insurer can now raise its equity investment limit to between 12% and 15%. However, private insurers had been hoping for an increase in the investment limit to 20%, as press reports indicate that the Ministry of Finance had allowed the government-owned Life Insurance Corporation of India (LIC) to invest up to 30%. It has been argued that there is one rule for the LIC and another for other insurers.
A slow creep back towards the tariff regime that existed from 1968 onwards has recently been evidenced in certain areas of the Indian insurance market, the most obvious of which is health insurance. The Insurance Regulatory and Development Authority has issued an exposure draft proposing that health insurance be standardised in order to address the expectations of the public "more effectively".
The Cabinet recently approved an increase in the cap on foreign investment in the insurance and pension sectors from the existing 26% to 49%. If the measure is passed, an inflow of fresh capital, an increase in the number of insurance joint ventures and faster development of the market are expected. However, voices of dissent from within both the ruling coalition and the opposition may interrupt its passage through Parliament.
State-owned insurers caught in turbulence
Following detariffication, insurance prices across a number of sectors were freed from regulation. In those classes of business, premiums plummeted as general insurers pushed for a greater market share. At the same time, prices were cut dramatically in lines of business that had traditionally been profitable. Used to seeing these insurers report profits, the Ministry of Finance recently took action.
In Radiant Overseas Pvt Ltd v Insurance Regulatory and Development Authority the Delhi High Court overturned a previous decision which had ordered an Indian travel company which was conducting business on behalf of an Ukrainian insurer, but which was unlicensed for insurance activities, to cease its insurance operations. The court stated that Indian laws cannot be held to apply to insurance businesses outside India.
Paradigm shift for overseas reinsurers
Further to recent regulatory changes for overseas non-admitted reinsurers, the Insurance Regulatory Development Authority is now reported to be considering further amendments to limit the percentage of premiums ceded by Indian insurers. If the proposed change is implemented, it will result in life insurers having to renegotiate a number of their treaty arrangements with overseas reinsurers.
