The Cabinet has cleared the Insurance Laws (Amendment) Bill that provides for increased foreign direct investment cap in the insurance sector, albeit with riders on management control. Douglas Henck, chairman & CEO, Aegon Asia in an interview to The Indian Express, says that he is “somewhat perplexed” over the clause about retaining Indian management control in joint ventures. He adds that his company has Indian nationals in charge and will remain so since any foreign investor is allowed to buy only up to 49 per cent stake in a joint venture.
How does Aegon Asia read the proposed rise in FDI cap in insurance?
We were of course very encouraged that the government is addressing this issue so early in the term. We look forward to contributing even more to healthy growth of the industry and to the customers we serve.
How much of a dampener is the clause about retaining Indian management in the insurance joint ventures?
I would not say a “dampener” so much as I would say that I am somewhat perplexed. We already have Indian nationals controlling the company, the Board of Directors, and the shareholding. This is as it should be, and it will still be the case if we are allowed to purchase up to 49 per cent of the shares. Given this, I am not sure what else is intended and why.
I am also a little confused about bringing the Foreign Investment Promotion Board into the picture, as the IRDA has been managing the industry’s joint venture arrangements – including FDI considerations – very effectively.
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Our joint venture agreements, for example, were vetted carefully by the Insurance Regulatory and Development Authority, and changes were made at the regulator’s direction; I would hope that these carefully constructed agreements would remain intact after being in force for so many years.
The foreign companies all wish to continue to provide their extensive expertise; in some cases, such expertise has been provided for well over a decade and benefits the Indian insurance industry and our customers.
Assuming the changes go through Parliament, how would you estimate the investment potential of the Indian market now against China?
I think I’ll have to wait to see what the final legislation and regulations look like. China allows 50 per cent foreign ownership and allows the joint venture’s shareholders to decide what each provides to the insurance entity.
The proposal has to be cleared through Parliament and then notified. That would take at least six months but meanwhile does it make sense for Aegon to plan to expand its footprint in India with Religare or with a new partner?
Six months is not a long time in the insurance world, particularly life insurance. We have plans that stretch out for the next several years.
Would you be interested in a public issue for your insurance joint venture?
We are not yet earning profits, so any speculation on this would be premature.