Royal SunAlliance had earlier scrapped its memorandum of understanding with the Delhi-based DCM Shriram Consolidation and was looking for a suitable partner for quite some time.

Sources point out that negotiations between Royal SunAlliance and IL&FS were in an advanced stage and may be announced before the winter session of the Parliament began.

The Insurance Regulatory and Development Authority (IRDA) bill, which had been tabled in the Lok Sabha during the inaugural session of the Parliament is expected to be passed by the Lok Sabha during its winter session. As specified by the IRDA, the company (Royal SunAllinace), will be allowed to hold only a 26 per cent in a domestic joint venture. IL&FS by forming a joint venture with Royal SunAlliance is pulling out of an three-way arrangement between theUS-based Cigna and the former chief of the pharma major Ranbaxy, Paramjit Singh. Worldwide, Royal SunAlliance has offices in more than 59 countries and transacts business in over 120 countries. The company will stick to general insurance business India though it undertakes both life and general insurance as its activities in other countries.

Royal SunAlliance was examining to tap the domestic health insurance market. Currently, it writes health insurance in 19 countries and is looking to expand this line of business in the next three years to most of the 59 countries in which it operates. Further, as Sebi has permitted the company as a foreign institutional investor in the country, it is also keen to start its fund management operation soon.

IL&FS which has a range of activities like investment banking and infrastructural project financing, will provide the right kind of platform to Royal SunAlliance which ranks among the top 10 global general insurance companies in the world. The joint venture betweenIL&FS and Royal SunAlliance will be one of the few general insurance companies, which would give a direct challenge to the four subsidiaries of the GIC after the sector opens for the private sector. Initial indications show there will be more jv for life insurance activities and less for general insurance as the nature of the general insurance business is more riskier than the other.