The American Insurance Association (AIA) has urged the U.S. and Indian governments to make market liberalization in India a major trade priority.
“Considering India’s size and potential as one of the world’s largest insurance markets, we call on the U.S. Trade Representative and Indian government officials to truly open India’s market to foreign insurers,” said David Snyder, AIA assistant vice president and general counsel.
India has a cap on the percentage of ownership foreign investors can have in an insurance company, and AIA has joined with other national and international insurance groups in urging India to allow foreign insurers an increased ownership percentage. This issue is part of ongoing talks at the World Trade Organization (WTO).
“We want the cap on foreign equity raised to at least 49 percent, with increasing percentages, and find it especially troubling that India may decide to lock-in the unacceptably low current cap of 26 percent in its revised WTO services offer,” stated Snyder.
India’s insurance sector has experienced “remarkable” growth since the limited opening up in 2000, including the creation of more than one million jobs directly and indirectly connected to employment in insurance companies and the business process outsourcing industry (BPO). This point along with others was made in a letter sent to India’s Ministry of Commerce and Industry signed by insurance associations like the AIA, insurance companies and intermediaries from countries that include the U.S., Great Britain, Canada, France, and Japan.
“Clearly there is room for further growth, which can be fostered, in part, by raising the current foreign equity ceiling,” the letter stated.
“India has an urgent need for infrastructure investment,” added Snyder. “Allowing foreign insurers to invest more capital can only help India’s economic development. Insurance companies invest in long-term financial instruments like government bonds that fund infrastructure such as roads, airports and bridges.”
Indian insurance companies have become more sophisticated and now compete globally. “Indian insurers are treated better in other countries than India treats foreign insurers operating on its shores,” said Snyder. “Raising the direct foreign investment cap will show the world that India is truly committed to being a good trading partner.”
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