Shiv Sena leader Manohar Joshi’s Kohinoor Group has applied for a reinsurance licence.
The company will be the first Indian entity other than the government-owned GIC Re to enter this space. It will also be the first politically owned entity in the financial sector. So far, RBI has disfavoured political exposure of bank license applicants and other financial sector regulators too have endorsed this line.
A government source aware of the developments said the company’s application was in the first or R1 stage with the Irda.
In an email to Indian Express, a Kohinoor spokesperson acknowledged they have applied for the licence. “We are always in the strategic process of consolidating our existing businesses as well as exploring possibilities of diversifying into emerging and promising business sectors. Reinsurance is definitely a business domain on our radar and is one of the areas that is being considered for future growth impetus”. Joshi is a former chief minister of Maharashtra and Lok Sabha Speaker.
Industry experts are, however, surprised that a company with absolutely no experience of even insurance has decided to apply for a reinsurance licence which is highly technical.
Once Kohinoor gets the licence it will compete with global giants like Swiss Re, Munich Re and syndicate members from Lloyds which have shown a keen desire to enter the Indian reinsurance market. There are just 14 re-insurance players in the world including GIC Re. The Kohinoor has filed the application ahead of the government promulgating an ordinance to raise the foreign direct investment cap for the sector to 49%.
There are 52 insurance companies in the life and non-life sector but none has been interested in re-insurance which is a highly capital intensive sector.
Incidentally Irda has been pushing Indian insurance companies to retain the maximum possible share of reinsurance business within the country especially that of life insurance. Last year it informed the companies that this sum should be upto 30% of the sum assured of a policy. The aim according to the regulator is to conserve outflow of foreign exchange. But Irda has not encouraged any Indian rival to GIC Re as the sector is a highly technical one.
For the Kohinoor group this is its first foray in the financial sector. The group runs vocational courses in hospitality, management and para medical education besides number of schools. Its website says it also has “significant presence in real estate, hospitality, power and healthcare sectors”.
Insurance companies buy reinsurance cover from specialist companies especially for policies with large premium to spread out their risks. Calculation of reinsurance premium requires vast insurance expertise.