Kathmandu. India’s opening up of 100 per cent direct investment in insurance will have an impact on the ownership structure rather than the entry of new investors.
When the foreign investment threshold reached 49% and then 74%, new companies and new foreign investors did not enter the market. Instead, there was a gradual change in stake growth, capital ratio, and control.
Ankit Baweja, a UK-based analyst, writes that in the next 24 to 36 months, three themes are likely to occur:
Full Ownership:
Many joint ventures were born out of regulatory requirements rather than long-term strategic alignments. If full ownership is possible, foreign insurers can acquire the remaining stake. Domestic groups can move to areas where insurance is no longer a major market.
Capital re-optimization:
Full control will pave the way for tighter capital allocations, clear dividend pathways and a strong alignment of reinsurance with global balance sheets. India can move from a partially besieged growth risk to a fully integrated operating platform.
Rating of distribution networks:
Distribution networks, especially bancassurance, can play a strategic role in the business. Minority distributors may have to ensure business by offering deep discounts.
