ITI Reinsurance, part of Fortune Financial Services, is set to become the first private sector reinsurance company in India.
Sun Pharmaceutical’s Executive Director Sudhir Valia and family control Fortune Financial Services.
On Thursday, the Insurance Regulatory and Development Authority of India (Irdai), gave the first phase licence or R1 to ITI Reinsurance.
At present, there is only one domestic reinsurer, General Insurance Corporation of India (GIC Re), a public sector company.
Other players that have applied for branch licence include global leaders like Swiss Re, Munich Re and Hannover Re.
Senior officials close to the development said that after the initial approval, ITI Reinsurance will have to secure the R2 and final R3 licence to commence reinsurance business operations. R1 is the preliminary approval given to companies.
Officers at Fortune Financial could not be contacted.
Reinsurance is taken by insurance companies to mitigate the financial risks that they take on their books by offering covers to entities. This covers them from any potential losses that they could face due to high claims.
In 2014, Valia, his family members and a few other investors acquired a majority stake in Fortune Financial Services from J T Poonja and Nimish Shah.
Valia is Sun Pharmaceutical Managing Director Dilip Shanghvi’s brother-in-law. In March 2016, Fortune Financial Services announced that it had acquired Kohinoor India Reinsurance Company and was planning to enter the reinsurance venture through this subsidiary.
Shiv Sena senior leader Manohar Joshi’s Kohinoor Group had earlier applied for a reinsurance licence with Irdai.
Fortune Group, which comprises the holding company Fortune Financial Services, provide a range of financial services including equity and commodity trading, portfolio management services, distribution of mutual funds and insurance products.
Indian insurers often spread their risks, especially in the commercial and industrial insurance space, among several reinsurers so that risks are evenly spread and there is adequate capacity to cover it.
According to recent Irdai norms, which will be reviewed after 12 months, the first preference in reinsurance treaties will be given to Indian reinsurance companies. If ITI Reinsurance gets the final licence, it will also get these benefits along with GIC Re.
However, GIC Re as the sole domestic reinsurer get a mandatory cession of five per cent from general insurers.
Mandatory cession to GIC Re means a fixed percentage of the total risks has to be reinsured with the national reinsurer.
It is not clear whether ITI Reinsurance will also get the same status once it gets the final licence.
The reinsurance industry is worth about Rs 18,000 -18,500 crore in India, of which life insurance constitutes about Rs 1,200 crore.