Policy paralysis: A setback for insurance sector M&A?

India’s insurance industry has been keenly awaiting the passage of the Insurance Laws (Amendment) Bill, 2008, for over six years. Despite changes in the political scenario, on each occasion that the bill has been presented for discussion in the parliament, it has faced strong opposition and criticism, particularly with regard to the proposal to increase the limits on foreign direct investment (FDI).

The bill was expected to be discussed by the parliament in December, although news reports suggested that there could be further delays. The only silver lining in the clouds is that after the change of guard at the centre, the Indian economy has shown signs of revival.

Time for reforms

For a sector riddled with increasing costs, constant regulatory changes and rampant exits of key promoters, it is urgent that meaningful reforms are introduced to bring back investor confidence and revive the sector’s low morale.

If the bill is enacted, it will provide a more conducive business environment and will act as a catalyst in accelerating merger and acquisition activity and unlocking the enormous potential for investment in this sector. There is no doubt that the sector has vast growth opportunities and investors are waiting to infuse much required capital.

Shailaja Lall is a partner and Ashish Teni is a senior associate at Amarchand & Mangaldas & Suresh A Shroff & Co. The views expressed in this article are those of the authors and do not reflect the position of the firm.