Insurance body for hike in foreign investment cap

Monday, 18 October 2004, 07:00 Hrs
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NEW DELHI: Even as the government continues to debate the issue of raising the foreign investment cap in insurance, the regulator for the sector Monday said it supports the move to spur growth and quality in the business.

"Of course, we do support it," C.S. Rao, chairman of the Insurance Regulatory and Development Authority (IRDA), told reporters on the sidelines of a seminar organised here by the Federation of Indian Chambers of Commerce and Industry (FICCI).

Finance Minister P. Chidambaram had announced a hike in foreign investment cap for the insurance sector in his budget speech in July, but the move met with strong opposition from the Left parties that support the government from outside.

Chidambaram had said the government was revising the foreign investment cap for the sector from 26 percent to 49 percent, but the opposition to it prevented the government from notifying the proposal.

Rao said the IRDA favoured the proposal since it would entail flexibility in investment decisions, help the foreign partner infuse fresh capital in the Indian venture and help the growth of the insurance business in the country.

He said a reason for liberalising the insurance business during the late 1990s was to increase the number of insurance options available to customers and improve the quality of available products.

"It was also felt that rapid economic growth witnessed in the 1990s cannot be sustained without a thriving insurance sector," he said.

Even with the limited opening up of the insurance sector, the total premium collected by insurance providers in the country has increased by 83 percent from 450 billion ($9.8 billion) in 2000-01 to 825 billion in 2003-04.

In comparison, insurance premiums grew just 66 percent in the years prior to insurance sector reforms from 271 billion in 1997-98 to 450 billion in 203-04, he added.

Source: IANS
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