
In the past nine years, India’s insurance sector has experienced a significant increase in foreign direct investment (FDI), amounting to almost Rs. 54,000 crore. This surge can be attributed to the government’s relaxation of regulations regarding the inflow of overseas capital. Financial Services Secretary Vivek Joshi has confirmed this trend, highlighting that the permissible FDI limit was raised from 26% in 2014 to 49% in 2015, and further increased to 74% in 2021.
In addition to the raised FDI limit for insurance companies, the government also expanded the permissible FDI limit for insurance intermediaries to 100% in 2019. As a result of these policy changes, foreign investors have infused Rs. 53,900 crore into insurance companies between December 2014 and January 2024. During this period, the number of entities operating in the insurance sector grew from 53 to an impressive 70.
The insurance sector has witnessed encouraging growth in terms of penetration and density, which are important indicators of sector development. According to Joshi, insurance penetration increased from 3.9% in the fiscal year 2013-2014 to 4% by 2022-2023. At the same time, insurance density rose from $52 per capita premium in 2013-2014 to $92 per capita premium by 2022-2023.
Financial metrics within the insurance sector have also shown significant improvement. Assets Under Management (AUM) nearly tripled, jumping from Rs. 21.07 lakh crore in the 2013-2014 fiscal year to an impressive Rs. 60.04 lakh crore. Similarly, total insurance premiums more than doubled, increasing from Rs. 3.94 lakh crore as of March 2014 to the current figure of Rs. 10.4 lakh crore.
The Zurich Insurance-Kotak General Insurance deal stands out as a significant milestone in the flow of FDI into the Indian insurance sector. Zurich Insurance has proposed to acquire a 70% stake in Kotak Mahindra General Insurance for Rs. 5,560 crore. This follows Kotak Mahindra Bank’s announcement in November 2023 of the sale of a majority stake (51%) in its general insurance arm to Zurich Insurance for Rs. 4,051 crore. The proposed acquisition is awaiting regulatory approval from relevant authorities.