The Insurance Regulatory and Development Authority of India (IRDAI) has given its initial approval — known as R1 — to the second Indian non-life venture by Fairfax Financial Holdings, owned by Canada-based Indian billionaire Prem Watsa. IRDAI, in its board meeting on Friday last week , had given a conditional approval to the new Indian joint venture established by Fairfax Holdings in India along with Oben General Insurance. Fairfax has a 49 per cent stake in the new Indian venture.
Lombard, a subsidiary of Fairfax, has an existing 17-year-old non-life joint venture — ICICI Lombard General Insurance — with India’s largest private sector bank, ICICI Bank. Lombard holds 36 per cent in ICICI Lombard General Insurance, the largest private sector general insurer.
However, Watsa’s Fairfax had decided to reduce its stakes in the existing joint venture ICICI Lombard General Insurance with little clarity on the reasons and recently decided to form a new general insurance venture with Oben General Insurance, a new company promoted by team of insurance professionals led by Kamesh Goyal, who recently quit a senior-level position at Munich-based Allianz Insurance.
ICICI Lombard did not respond to a request from The Indian Express for comments on the move.
IRDAI, which cannot allow two licences for the same business in India, has stipulated that Fairfax has to reduce its stakes in the existing joint venture ICICI Lombard to below 10 per cent to facilitate 49 per cent stake in the new joint venture. Any investment below 10 per cent in any Indian insurance company is treated as a financial one and doesn’t prevent strategic investment up to 49 per cent in another insurance joint venture.
IRDAI wants reduction of stakes by Fairfax in ICICI Lombard before the regulator considers the second level of approvals — known as R2 — for the new joint venture Oben Insurance. The second stage approvals for Oben Insurance, according to sources, is at least three months away when IRDAI board will meet.
Sources at Oben Insurance point out that the company will have a capital of Rs 200 crore and will have its head office in Bengalaru. The majority of capital for the company will be funded by Fairfax Holdings and other Indian investors. The new non-life joint venture will have a significant investment in IT platform for its business.
Currently, there are four directors associated with Oben General Insurance. They are Philip Varghese, Jasleen Siddharth Sathaye, Sameer Mukund Bakshi and Kamesh Goyal, who all have worked with Allianz joint ventures — Bajaj Allianz Insurance.
Oben General Insurance is in the process of roping in other Indian investors whose names have not been made public as yet. Sources say they may be insurance professionals. Goyal, a former official of New India Assurance, was one of the original employees of Allianz for its India operations in 2000.
Fairfax, according to sources, is in early talks to sell 25 per cent of ICICI Lombard in a deal that could fetch up to $1 billion. Private equity firms, including Blackstone Group and KKR & Co, as well as some Canadian pension funds have expressed interest in Fairfax’s stake in ICICI Lombard, the sources said.