Foreign equity in joint ventures will be capped at 26 per cent, Ranagachary said at an insurance seminar organised by Assocham. The BJP government had considered a proposal to allow 14 per cent equity to NRIs but the same was vetoed by the standing committee on finance.

This proposal has been effectively buried now, he said. Which ever government comes to power it is unlikely that foreign equity in joint ventures will be pegged higher than 26 per cent, Rangachary said.

Speaking on the issue of capital, Rangachary stressed that minimum capital, for both life and non-life companies, will be pegged at Rs 100 crore. Also, the entire equity will have to maintained in the form of equityholdings. "It cannot be maintained in any shape and manner other than equity holdings," he said.

On the issue of capital, Rangachary clarified that if a foreign company ties up with its subsidiary in India for a joint venture, the foreign holdings of both companies will be clubbed together to arrive at the aggregate figure of foreign equity.

It is also definite that composite licences will not be allowed, Rangachary said. If the same set of partners, Indian and foreign, want to be in both the life and non-life sectors they will have to incorporate two different companies, one for each sector, he said. The companies for life and non-life must be different and must have independent capital structures, he added.

On maintaining solvency margins by new private companies, Ranagachary said the computation of solvency margin will have to be done on a daily basis. He underscored that the computation cannot be done at the end of the year. The IRA is formulating extensive guidelines for the computation of solvencymargins he told the seminar.

The IRA chairman announced that by the end of the month, ombudsmen will be appointed for four cities -- Delhi, Mumbai, Madras and Lucknow -- to settle disputes between the four subsidiaries of General Insurance Corporation and companies or individuals.

The ruling of the ombudsmen will not be binding on either individuals or companies. But if the party in dispute decides to settle with the GIC company on the ruling of the ombudsman the company will not have the option of appealing to court, Rangachary said.

Also speaking at the seminar, special secretary insurance BK Chaturvedi said by 2005 the insurance industry in India should have an aggregate premium income in the region of $30 to $40 billion. Currently, the Life Insurance Corporation and GIC have an aggregate fund size of $7 billion between the two of them.

The insurance industry is growing at the rate of 2.5 to 3 per cent every year, the economy is expected to grow at the rate of 6 to 7 per cent and poverty is alsodecreasing, this should see more funds flowing into insurance companies, Chaturvedi said. The pension funds industry is bound to grow in India, currently pension funds comprise only 5 per cent of LIC's corpus, Chaturvedi said.