Insurance sector Current Affairs - 2020

HDFC to sell its 9 percent stake in HDFC life to JV partner Standard Life for Rs. 1700 Crore

HDFC has announced to sell its 9 per cent stake in HDFC Life Insurance to its British joint venture partner Standard Life for sum of 1,700 crore rupees.

Prior this agreement HDFC had 70.65 per cent stake while Standard life had 26 per cent stakes which will be change to 61.65 per cent and 35 per cent respectively.

This move was taken in line to increase the role of its foreign partner which followed the Centres approval to hike FDI to 49 per cent from 26 per cent in Insurance sector.

As per the agreement HDFC will issue 17.5 crore shares at the rate of Rs. 95 per share to Standard life.

Note: HDFC life in a Joint venture between HDFC and Standard life launched in 2000 and is the first private life insurer to be granted a licence to operate in India.

Key Facts of Insurance sector in India:

  • There are over 52 insurance companies in India out of which 24 are in life insurance business and 28 are non-life insurers.
  • Life Insurance Corporation (LIC) is the sole public sector company among Life Insurance Company and there are six public sector insurers among non-life insurers.
  • Apart from that there is sole national re-insurer the General Insurance Corporation of India (GIC).
  • The market size of India’s Insurance sector is 70 billion US dollars.
  • Kotak Mahindra Bank is the first bank to set wholly-owned non-life insurance company.
  • As per Pradhan Mantri Jan Dhan Yojana even the Zero balance account opened prior to August 28, 2014 get Rs 1,00,000 insurance cover.

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Irdai sets up 3 committees to review regulations in insurance

In a row of recently passed Insurance Act, the Insurance Regulatory and Development Authority of India (IRDAI) have constituted three committees for review of regulations in insurance sector.

These three committees are formulated to regulate Insurance sector in areas of life insurance, general insurance and re-insurance that also includes registration of foreign offices of reinsurers.

Ever since the Insurance Act has been approved there was a need to review and revise existing regulations in insurance sector, these committees are the formed to fulfil the same motive.

Function

The life insurance committee will specifically work for the regulations in areas like liabilities, assets and solvency margin and appointed actuary.

The general insurance committee will specifically work for the regulations in areas like claim reserving and appointed actuary.

Reinsurance committee will specifically work for the regulations on the issues relating to registration of branches of foreign reinsurers among others.

These committees mandatorily have to submit report within one month to the Member-Actuary of IRDAI.

Background:

The Insurance Laws (Amendment) Bill 2015 passed in March, paved the way for major reform related amendments in the Insurance Laws. This amendment was done with motive to remove outdated and redundant provisions in the legislations and to provide Insurance Regulatory and Development Authority of India (IRDAI) flexibility to discharge its functions more effectively and efficiently. On line of reforms it enhanced the foreign investment cap in an Indian Insurance Company from 26% to an explicitly composite limit of 49% with the safeguard of Indian ownership and control.

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