Canada's Fairfax Financial Holdings plans to sell a 12.2% stake in its Indian joint venture insurer ICICI Lombard General Insurance in a deal that will value the company at INR203 billion (US$3.15 billion), reported Reuters.
Red Bloom Investment, a company wholly owned by private equity investment funds managed by Warburg Pincus, is buying a 9% stake, while two other investors, Tamarind Capital and IIFL Special Opportunities Fund, are buying 1.59% each from Fairfax, ICICI Lombard said in a statement.
After the sale, India's ICICI Bank will own about 63.3% of the insurer, while Fairfax's stake will be about 22.1%.
In January, sources familiar with the matter said Fairfax was looking to sell a 25% stake in ICICI Lombard as it looks to set up a new general insurance joint venture in India
Role of foreign partners in insurance ventures
Meanwhile, insurance industry players are of the view that having a foreign partner is no longer a must, reported Moneycontrol. The newest entrants to the general insurance sector, Kotak General Insurance as well as DHFL General Insurance, are 100% Indian owned.
“The reality is, when we entered the industry in 2001, we had no clue of how this business was done. It was imperative that we have a partner who not only brought in some capital but also had the requisite experience in the sector. That is no longer the case,” said an executive director at a private life insurance company.
Another reason is changes to the insurance law. While the law was amended in 2015 to increase the foreign direct investment ceiling in an insurer to 49% from 26% previously, the inclusion of the Indian management and control clause has dampened the enthusiasm of foreign entities to invest in this space, Several global companies have also faced constraints in their domestic markets leading to an exit from the Indian market.