FDI hike in insurance, LIC IPO, privatisation of state-run insurers credit positive: Moody's
Lenient FDI regulations, listing of LIC, and privatisation of a government-owned general insurer should benefit the broader domestic insurance market as these entities hold dominant positions, says Moody's
- Feb 3, 2021,
- Updated Feb 3, 2021 10:40 PM IST
Global rating agency Moody's has lauded the government's decision to hike limit on foreign direct investment (FDI) in Indian insurance companies to 74 per cent from existing 49 per cent. The loosening of restrictions on foreign ownership of insurers announced in the Union Budget is credit positive as it will provide new sources of funding. The move will also offer access to external know-how that can support insurers' underwriting performance and unlock new operating efficiencies, it said.
Moody's said that the potential for higher foreign ownership will increase insurers' financial flexibility by offering additional opportunities to bolster solvency. Besides, insurers would also benefit from the sharing of risk management best practices, possibly leading to a lowering of exposure to high-risk assets and adoption of risk-based capital management.
"We have already seen evidence of the benefits of foreign ownership with India's privately-owned insurers, which have lowered their exposure to high-risk assets and been early adopters of actuarial-led reserve management and risk-based capital management," says Moody's.
Global rating agency Moody's has lauded the government's decision to hike limit on foreign direct investment (FDI) in Indian insurance companies to 74 per cent from existing 49 per cent. The loosening of restrictions on foreign ownership of insurers announced in the Union Budget is credit positive as it will provide new sources of funding. The move will also offer access to external know-how that can support insurers' underwriting performance and unlock new operating efficiencies, it said.
Moody's said that the potential for higher foreign ownership will increase insurers' financial flexibility by offering additional opportunities to bolster solvency. Besides, insurers would also benefit from the sharing of risk management best practices, possibly leading to a lowering of exposure to high-risk assets and adoption of risk-based capital management.
"We have already seen evidence of the benefits of foreign ownership with India's privately-owned insurers, which have lowered their exposure to high-risk assets and been early adopters of actuarial-led reserve management and risk-based capital management," says Moody's.