According to two sources with direct knowledge of the negotiations, Zurich Insurance Group is in talks to acquire up to 51% of India’s Kotak General Insurance. If the talks proceed, it will be the company’s first significant investment in the rapidly expanding South Asian insurance industry.

The Indian startup, backed by Asia’s richest banker Uday Kotak, is valued in the early stages of negotiations at roughly $800 million, and Zurich Insurance has expressed interest in either acquiring a minority investment of 49% or a controlling stake of 51%, according to the sources.

According to them, the share the Swiss insurer hopes to acquire will be worth about $400 million.

According to the first source, Kotak is still examining offers, including those from other investors, although it prefers to keep “control of the company” after the stake sale.

One of the biggest insurers in Europe, Zurich, said in a statement that “as a matter of principle, we don’t comment on market rumours and speculations.” Inquiries from Reuters went unanswered by Kotak General Insurance, which is owned entirely by Kotak Mahindra Bank, the largest bank in India.

The Kotak insurance division’s interest in selling a stake has previously been revealed, but this is the first time that the conversations with Zurich, the prospective deal size, and the valuation have been made public.

According to a survey by CareEdge Ratings, there are more than 30 businesses operating in India’s general insurance industry, whose yearly premium collections increased 11% to $26.7 billion in 2021–2022 because to improving financial literacy and income levels.

For instance, many people in India still view health insurance as a tax-saving strategy. With non-life insurance penetration in India remaining at 1% in 2021 compared to the global average of 4.1%, CareEdge continued, underscoring “the potential of the industry.”

Already, international firms have general insurance arrangements with Indian banking or financial enterprises include Germany’s Allianz and South Africa’s Lombard.

According to the first source, Kotak, a relatively smaller player in the general insurance market, is in talks to sell a stake in order to find an investor who can help them “turn around the business and grow faster.”

When larger rival HDFC Ergo earned $1.66 billion, the Kotak business reported a loss of $10 million and a premium income of $91.35 million in 2021–22.

Unaware of the ongoing negotiations, one industry executive in Europe claimed that Zurich has been studying the Indian market for some time. There, businesses are typically more profitable and have better margins than in Europe.

Since it can “compete without being a dominant player” in countries like China and India, Zurich stated in 2017 that it wants to expand its footprint in these regions. The business works in more than 200 nations and offers life insurance in addition to health and auto insurance.

India loosened its restrictions on foreign investment in the insurance sector in 2021, allowing businesses to increase their controlling stakes from 49% to 74%.

(Adapted from FlipBoard.com)