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I-Bill to Help Insurers Break-even

For the foreign capital to start flowing in, it will take more than 3 months as it has to go through a lot of due diligence

Published: 14th March 2015 06:05 AM  |   Last Updated: 14th March 2015 06:05 AM   |  A+A-

CHENNAI:The Insurance Bill is likely to aid cash-starved insurance companies achieve break even in the coming quarters. Currently, of the 24 life insurance companies and 28 non-life insurers, only a handful including state-run Life Insurance Corporation make profits.

I-Bill.jpg“Increase in capital will give us some headroom and turn things around. We are confident that we will post a profit in the coming fiscal,” V Jagannathan, CMD, Star Health and Allied Insurance told Express.

Star Health also announced that it will raise capital to the tune of Rs 300-400 crore in the coming months.

The sector was opened up in 2000 and with the passing of the Bill on Thursday, the increase in FDI cap to 49 per cent, formally paves the way for companies to raise the much-needed capital for expasion. T S Vijayan, Chairman, IRDAI had recently projected that the sector was in need of over $7-12 billion. However, insurers say, the actual foreign capital will start flowing in more than a quarter from now.

“The process has to go through a lot of due diligence. The IRDA does not want any ‘fly-by-night’ operators and so due diligence is very rigorous,” said Swaraj Krishnan, CEO & Managing Director, Magma HDI General Insurance.

He added that the entire process, when initiated, shouldn’t take long, especially with the push from the government.

“Companies would have gotten ready as soon as the ordinance was promulgated, since it was certain that it would become law. If the companies have everything ready, I do not believe it will take more than 3 months,” said Jagannathan.

Soon after the Bill was passed, leading private insurance players including Bharti and Reliance Capital have announced they would get more capital through stake sales to their foreign partners.

But however ready the industry, the speed at which real-time investment flows in would depend entirely on the regulator. As C R Mohan, VP & State Head - Telangana and Andhra Pradesh, Bajaj Allianz General Insurance said, “The ball will be in the regulator’s court.”


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