Ordinance boost: RCap eyes foreign funds in insurance ventures

Reliance Capital will soon begin active discussions for Japanese giant Nippon Life hiking its stake in Reliance Life Insurance Company

Within days of government allowing more overseas investment in insurance sector through an ordinance, Anil Ambani-led Reliance Group has initiated a process for inducting foreign partners in its general and health insurance ventures with up to 49% stakes.

Besides, the group's financial services arm Reliance Capital would soon begin "active discussions" for Japanese giant Nippon Life hiking its stake in Reliance Life Insurance Company (RLIC) to 49%, from 26% at present.

"Initial discussions have already been held with Nippon for additional stake in our life insurance venture, while preliminary talks have taken place with some prospective partners for health insurance and the rest of general insurance businesses as well," Reliance Capital CEO Sam Ghosh told PTI in an interview.

The discussions could not move to advanced levels earlier, as the investors were waiting for clarity on foreign investment policy for the sector. Active discussions would now begin as the government has allowed up to 49% foreign investment by promulgating an ordinance.

While Nippon Life is interested in hiking its stake in Reliance Life to 49%, Reliance Capital may bring in a new foreign partner for up to 49% stake in its general insurance venture as well, Ghosh said.

Besides, the company plans to hive off its health insurance business into a separate company and would look at bringing in a strategic partner there as well with up to 49% stake, he added.

"While initial discussions have been continuing with some prospective partners in these areas, they were awaiting clarity on policy front and active discussions are likely to start now pursuant to the promulgation of the insurance ordinance," Ghosh said.

Health insurance accounts for 25% of total general insurance business and this business has strong growth potential in the long term, he added.

Health insurance industry is currently estimated at around Rs 20,000 crore and is growing at a CAGR of 30%.

The overall general insurance industry is today estimated at around Rs 78,000 crore and it is expected that in coming years health insurance would be at least equal to the size of the rest of the general insurance industry, if not bigger. Worldwide also, health insurance businesses are kept separately from the rest of the general insurance industry.

On Nippon Life hiking its stake in life insurance venture with the government promulgating an ordinance to facilitate up to 49% stake in the insurance sector, Ghosh said that Reliance Capital would soon begin active discussions with the Japanese partner in this regard.

"The work is already on with regard to Nippon hiking its stake in mutual fund venture and the companies are currently awaiting CCI approval for their recent agreement wherein Nippon Life is hiking its stake from 26% to 49% in phases," he said.