HDFC would sell 26 % in its insurance arm HDFC General Insurance to Munich Res Ergo International subsidiary for an undisclosed amount. The new company will be named as HDFC Ergo General Insurance Ltd.
Confirming the development HDFC chairman Deepak Parekh said, HDFC would sell 32.5 million shares in HDFC General Insurance.
According to present regulations foreign companies can own upto 26% in a domestic insurance company. HDFC indicated that if the foreign equity cap is raised to 49%, it would sell remaining 23% to Ergo. The companies declined to give financial details of the deal pending regulatory approval. It is expected to be completed by the end of this year.
Earlier, US-based Chubb Corporation had 26% stake in HDFC General insurance Ltd. However, Chubb, after five years of partnership, walked out of the venture in May by surrendering 26% of its stake to HDFC for an undisclosed amount. Following this, the venture became 100% subsidiary of HDFC. Munich Re was looking for an Indian partner in the life insurance sector.
We are in talks with some companies who are not in life insurance business at present and hope fully we may reach an agreement by the end of this year, said Munich Re Chief Nikolaus von Bomhard. The Indian market is under-insured, with a penetration level of 0.6 % of GDP for non-life insurance and 4% for life insurance.