IRDA issues first Indian private sector reinsurance licence

The IRDA board on Thursday approved the initial license — known as R1 in regulatory parlance — to ITI Reinsurance, promoted by a firm controlled by Sun Pharma co-promoter Sudhir Valia.

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ITI Reinsurance is owned by Fortune Financial Services, in which Valia and others have a majority stake.

The Insurance Regulatory and Development Authority of India (IRDA) has given its first phase of licence to ITI Reinsurance, thus clearing the first ever Indian private sector reinsurance company in the country.

The IRDA board in a meeting in Hyderabad on Thursday approved the initial license — known as R1 in regulatory parlance — to ITI Reinsurance, promoted by a firm controlled by Sun Pharma co-promoter Sudhir Valia. State-owned GIC Re has been the country’s sole reinsurance company so far. Four global players — Munich Re, Hannover from Germany, Swiss Re from Switzerland and French major SCOR — have also received R1 licences and they are awaiting final clearance from the regulator. Lloyd’s of London has also got the initial clearance from the IRDA.

ITI Reinsurance is owned by Fortune Financial Services, in which Valia and others have a majority stake. PK Shah who had earlier worked in New India Assurance and Reliance Industries has been appointed as the MD & CEO of the company. Valia is the brother-in-law of pharma tycoon Dilip Shanghvi, and executive director and co-promoter of the world’s fifth largest generic drug maker Sun Pharma. Valia, along with a couple of high net-worth individuals, bought Fortune Financial Services from its original founders J T Poonja and Nimish C Shah.

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Last month, Shanghvi, IDFC Bank and Telenor which got the RBI licence for a payments bank pulled out from the race. Earlier, Fortune Financial Services had taken over a company floated by Shiv Sena leader Manohar Joshi’s Kohinoor Group that had applied for a reinsurance licence.

After providing the R1 clearance, the regulator now is conducting the due diligence for granting the final approvals (R2) to the global reinsurers to set up direct operations and the process may take some time. Munich Re is the largest reinsurance player in the world while Swiss Re is the second largest and Hannover comes third in global size.

After the IRDA had announced its reinsurance regulations in November 2015, seven global reinsurers, which have been doing their business offshore, have already applied for the license to set up branch operations in India. Two more global players, US based Reinsurance Group of America (RGA), an exclusive life reinsurance player and UK-based XL Catlin are waiting for the R1 clearances from the IRDA. While normal insurers need three stages of clearances, reinsurers have to get only two levels of approvals.

“We don’t see any threat. There’s ample room for anyone — both domestic and foreign — in India. Growth is in this part of the world and we are an established reinsurer,” GIC Re chairman and MD Alice Vaidyan said on the imminent entry of several global reinsurance companies into India. GIC which gets 45 per cent of its premium from the overseas business is planning to push up the overseas share to 50 per cent. GIC now gets 5 per cent compulsory reinsurance deals in India.