IRDAI asks Universal Sompo General Insurance's Japanese MD to step down

KOLKATA: Playing to the Swadeshi tune, the Insurance Regulatory & Development Authority of India ( IRDAI) has ordered Universal Sompo General Insurance Company’s managing director Taketoshi Nagaoka to step down immediately due to his foreign origin.

IRDAI has also asked the current chairman ON Singh to continue as an executive till a new MD with local origin takes charge. Once a local MD is appointed, Singh will take up a lesser role as a non-executive chairman, as part of new management structure.

Sompo Japan Nipponkoa, the overseas partner for the insurer, is expected to raise stake to 49% in the next two months. The local joint venture has begun the management level restructuring to comply with the new foreign direct investment rules, which call for full Indian management control.

It has proposed to make the chairman’s position a non-executive one, a deviation of a policy practiced all along. It has also started scouting for a local chief executive.

The restructuring process is expected to be over by mid-July while the insurer had sought three-month extension for Nagaoka till the process gets over. Sources in the company said that IRDAI’s rejection to the proposal came last week.

“Till we appoint a new managing director, I will continue as the executive chairman,” said ON Singh, who has been in the executive role since inception. “The appointment process should be over by mid-July and then I will become the non-executive chairman.” Singh told ET.

Sompo, which holds 26% in the general insurer promoted by Allahabad Bank and Indian Overseas Bank, is expected to raise its stake to 49% in the next two months in a capital-neutral exercise. Shareholdings of the local partners including Karnataka Bank and Dabur will be reduced proportionately.

“Sompo has expressed its intention to raise stake to 49%. The valuation process in on,” Singh has confirmed.
Allahabad Bank holds 30% while IOB has 19% interest in the JV. Karnataka Bank and Dabur hold 15% and 10% respectively.

Sources in Universal Sompo said that the IRDAI directive might put the company’s day-to-day operation in bind in the absence of an MD. The insurer will hold a board meeting next week to review the emerging situation.