Insurance shares gain on hike in FDI limit to 74%; Bajaj Finserv surges 9%

Shares of companies engaged in insurance business rallied by up to 9 per cent on the BSE on Monday after the government proposed to increase foreign direct investment in the sector to 74 per cent, a move aimed at attracting overseas players.

The limit on FDI in Indian insurance companies will be lifted from 49 per cent to 74 per cent, said Finance Minister Nirmala Sitharaman on Monday in her Budget speech for 2021-22, accepting a demand the industry had proposed for long.

The law presently says an Indian insurance company has to be “Indian-owned and controlled”. This gives the Indian partner the right to appoint a majority of directors or control the management of a company. The Insurance Act will be updated to allow foreign ownership in insurance with safeguards. CLICK HERE TO READ FULL REPORT

Among individual stocks, soared 9 per cent to Rs 9,480 on the BSE in intra-day trade. The company held 74 per cent stake in Bajaj Allianz General Insurance Company Limited, the second largest private General insurer in India in terms of Gross Premium.

General Insurance Corporation of India, too, rallied 9 per cent to Rs 144 on the BSE. ICICI Prudential Life Insurance Company has rallied 6 per cent to Rs 510 on back of two-fold jumped in trading volumes in intra-day trade.

HDFC Life Insurance Company and Max Financial Services advanced 5 per cent, while SBI Life Insurance Company and ICICI Lombard General Insurance Company were up 4 per cent each on the BSE. In comparison, the S&P BSE Sensex was up 4.2 per cent at 48,231 points at 01:40 pm.

The Indian insurance sector has been growing substantially over the past few years. Life insurance continues to dominate domestic insurance premium. Covid-19 affected the entire economy but life insurance companies suffered on two accounts namely loss of sales and outgo in terms of claims settlement. However, a silver lining is that the more consumers have realized the importance of insurance.

CARE expects the domestic industry to grow driven by pension products, life cover products, supportive regulations, effective distribution and improving customer services. However frauds and high lapse-ratio are some of the key challenges.

The outlook for the insurance industry is not just a function of the economic growth but industry specific factors such as expansion in insurance penetration, evolution and change in the share of various distribution channels, enabling regulatory movement, also affect the premium growth, the rating agency said in recent Indian Life Insurance sector update.

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