Stephen Simchak, director of international affairs for the American Insurance Association (AIA), testified about trade and investment barriers that U.S. property-casualty insurers face in India at a public hearing before the U.S. International Trade Commission (ITC). He was the sole representative of the P&C insurance industry to testify.
The AIA explained that the is “hearing is part of a larger investigation requested by the Senate Committee on Finance and House Committee on Ways and Means on ‘Trade, Investment, and Industrial Policies in India: Effects on the U.S. Economy.’”
India’s insurance sector represents enormous potential for U.S. insurers. However, the AIA’s bulletin noted, that “insurance penetration in India remains low at 0.8 percent in part due to trade and investment restrictions. Simchak’s testimony focused on how India’s foreign direct investment (FDI) cap, regulatory issues and prohibitions against reinsurers stifle U.S. involvement in India. The 26 percent FDI cap represents the largest challenge to U.S. insurers, and has discouraged or prohibited U.S. and insurers from entering or expanding the market.”
Simchak said: “Fourteen years after the opening of the Indian insurance market, barriers in India remain. Though many jobs have to be located in the country where the business is being performed, when a U.S.-headquartered insurance company expands abroad, it will generally perform many services related to its management of the foreign affiliate from its U.S. headquarters. That means jobs in the U.S.
“At the same time, as India becomes more and more of an economic powerhouse, there is an ever-growing need in India for sophisticated insurance products that U.S. insurers can provide. As Indian corporations grow in size and number, they need to insure their property and products, and protect themselves from liability. And, as India’s population continues to grow and become more affluent, the need for personal lines of insurance will continue to grow as well. Breaking down barriers in the insurance sector would greatly benefit the U.S. and India alike.”
Simchak’s testimony also made suggestions for U.S. engagement with India on these barriers. “We need to remember that India will only act on the FDI cap if it is demonstrated to be in the interests of India,” he said.
Source: The American Insurance Association (AIA)