Page 6 - Insurance Times September 2019

Govt to increase vehicle Centre relaxes norms for re-insurers for setting up shop
reg charges massively at IFSC

With an aim of discouraging petrol In a bid to promote IFSC as an attractive destination for investment for global
and diesel ve- re-insurers, the government has relaxed norms for
hicles, phasing setting up shops at Gandhinagar international finan-
out old ones cial services centre.
and promoting The notification of Finance (No. 2) Act, 2019, has
electric vehicles, the ministry of paved the way for reduction of the Net Owned Funds
road transport has recently pro- (NOF) requirement for the opening of branches of
posed in a draft notification to in- foreign re-insurers in International Financial Services Center (IFSC) to Rs 1,000
crease the two fees in case of most crore from Rs 5,000 crore. Along with the amendment in the Insurance Act
categories of vehicles running on 1938, the reduction in NOF requirement is likely to attract global re-insurance
conventional fuel. companies operating in financial centres like Hong Kong, Malaysia, Singapore,
The new registration fee will be Rs Dubai, London etc. in order to develop branches in IFSC in India.
1,000 against the current Rs 50 for Thus, the above amendment is likely to cause an increasement in the number
two-wheelers. The renewal charges of foreign re-insurance players in IFSC, Gandhinagar and lead to onshoring of
for the same will be Rs 2,000. international insurance transactions, according to a ministry official.
Meanwhile, in the case of cabs, the
General Insurance Corporation of India in 2017 opened its IFSC Insurance Of-
registration fee and renewal charges
will be Rs 10,000 and Rs 20,000 re- fice (IIO) at IFSC Gandhinagar in Gujarat, the first and only IFSC so far. Finance
spectively, with an increase from the Minister Nirmala Sitharaman in her budget speech, announced the
current Rs 1,000. government's intent to make India a hub for aircraft financing and leasing ac-
tivities by leveraging business opportunities available in India's financial Spe-
The new registration fee will be Rs cial Economic Zones (SEZs), namely, IFSC.
20,000 against the current Rs 2,500
Apart from that, the government has provided several direct tax incentives to
in case of imported motorcycles.
an IFSC including 100% profit-linked deduction in any ten-year block within 15
"We have sought feedback from all
stakeholders before notifying the fi- years and exemption from dividend distribution tax among others.
nal fee structure in the next 40-45
days," said an official. Non-life insurers witness Rs 44 crore loss in FY19
The non-life insurance sector witnessed Rs 44-crore loss in FY19 as National,
A draft proposal has already been no-
tified by the ministry to do away with Oriental Insurance and United India have together
registration fee of electric or battery- reported losses of Rs 4,200 crore, which is more than
the collective profits of the remaining 23 companies.
operated vehicles. Moreover, people
buying new vehicles after scrapping The government is looking for a merger and a sub-
old polluting ones will be exempt sequent listing of these companies. However, due to
from paying the registration fee. their poor financial performance, they will require
"The proposal of steep increase in a capital infusion. The performance of the PSU insurers in FY19 is in sharp con-
the renewal fee for commercial ve- trast to their financials in FY18.
hicles, particularly trucks, buses and The four PSU insurers, inclusive of the listed New India Assurance, reported a
other heavy vehicles by nearly 27 combined net profit of Rs 2,543 crore in FY18. In FY19, the four PSU insurers
times is aimed at making people opt reported a combined loss of Rs 3,628 crore despite New India turning in a Rs
for scrapping them once they are 645-crore profit.
over 15-year old," said a government At the same time, the private insurers have reported a net profit of Rs 3,584
official. As per the proposal, an addi-
crore, registering a decline of 8%. Industry officials say that profits have de-
tional fee of Rs 50 will be charged for
each day, if the owners of more than clined partially because the industry did very well in crop insurance in the pre-
15-year-old vehicles fail to get fresh vious year, which was not the case in the year under review. In addition, un-
fitness certificate before they expire. derwriting losses in property insurance have been very high, prompting the
General Insurance Corporation to increase rates in some segments.

6 The Insurance Times, September 2019