India Regulator Supports Higher Limit for Foreign Insurance Investment

December 20, 2005

A report from Dow Jones Newswires indicates that India’s Insurance Regulatory and Development Authority has recommended that the government raise the foreign direct investment limit in the insurance sector to 49 percent from 26 percent.

The report notes that in reply to a question from a lawmaker Minister of State for Finance S.S. Palanimanickam said the IRDA recommended the hike because Indian insurance promoters are facing constraints to meet solvency requirements.

A proposal from Finance Minister P. Chidambaram in 2004 to raise the limits failed to muster enough parliamentary support in the face of strong opposition from the government’s left-wing allies, who are concerned that foreign insurers could weaken the current state owned insurers.

The IRDA’s recommendation may bolster the government’s position for raising the FDI cap.

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