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Berkshire to buy agency licence in India


Guest kumar
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Very interesting. Thanks for posting!

 

A little more color on the investment:

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Buffett-takes-agency-route-to-enter-Indian-insurance/articleshow/6072882.cms

 

"According to sources, Berkshire is using this route because the low foreign direct investment limits in all other insurance business make it unattractive to the US giant. Whether it is life or general insurance or even insurance broking, current regulations do not permit foreign investors to hold more than 26% equity stake in the business.

Corporate agency is, however, an exception. Under current regulations, any entity, including a foreign bank or any foreign-owned finance company can become an insurance agent by acquiring a corporate licence.

 

A corporate agency, however, has its limitations. For one, every individual selling insurance in a corporate agency firm has to undergo training. Secondly, the agency can sell products for only one company. A corporate agency can, however, look forward to decent margins with commissions going up to 15% of the premium amount. "

 

I'm curious about the corporate agency route vs the route Fairfax has taken with ICICI Lombard.

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Managing business risk, suggests sticking with 26 pct, and not pushing for 49 pct.  The latter has political risk, as winds shift.  The former is reasonable participation, plenty of profit, it's a huge country developing rapidly.  India does not want colonial rule in whatever guise.

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