Irda rejects Watsa's plan to buy Sudhir Valia’s ITI Reinsurance

MUMBAI: The Insurance Regulatory and Development Authority of India (Irda) has rejected Prem Watsa’s proposal to acquire ITI Reinsurance owned by Sudhir Valia, brother-in-law and business associate of Sun Pharma cofounder Dilip Shanghvi, said people with knowledge of the matter. The regulator’s stand is that ITI Reinsurance’s licence stipulates a five-year lock-in during which its shares can’t be sold, they said.

Watsa, who has been investing in India’s financial services, may have to apply afresh if he wants to still pursue business in the sector, they said.

Last year, the Watsa-promoted Digit Insurance had filed an application with Irda to buy ITI Reinsurance from Valia’s Fortune Financial Services. Valia is also a co-promoter of Sun Pharma.


Digit had sought a reinsurance licence under the name of ValueAttics but the request was withdrawn after it decided to buy ITI Reinsurance. The rejection means it may have to apply for a fresh licence.

“Irda is of the view that one shouldn’t be trading a licence,” said a source close to the development. “If you allow this, there can be a situation when people start trading licences. If they (ITI Reinsurance) are not doing any business, they will have to surrender the licence.”

Digit Insurance chairman Kamesh Goyal declined to comment.

ITI Reinsurance got its licence in December 2016 and has a capital base of Rs 500 crore but was yet to commence business, according to the Irda annual report for FY18.

In order to set up a branch, a reinsurance company needs an initial capital of Rs 500 crore. Brokers operating in India have however said that reinsurers setting up local branches will gain monopoly access, throttling competition and innovation. Irda has given licences to reinsurance companies such as Munich Re, Swiss Re, SCOR SE, Hannover Re and RGA to open branches in India after the Insurance Act was amended in 2015.

India has 361 registered reinsurers.

ITI Reinsurance hadn’t been able to commence business because, under the regulations, insurance companies can only insure with a domestic reinsurer that has a credit rating for the past three years, reflecting financial stability. That forced ITI to return proposals it had received by the end of March 2018.

This requirement has attracted global firms that would like to get a share of the Rs 30,000 crore reinsurance market in India.

In FY18, total reinsurance premiums accepted by foreign reinsurance branches amounted to Rs 6,216 crore, out of which Swiss Re had the largest share of Rs 2,047 crore.

It was followed by Munich Re with Rs 1,307 crore and SCOR with Rs 1,186 crore.