Zurich, Kotak Mahindra seal largest deal in India's general insurance space

Switzerland-based insurance major Zurich Insurance Company Ltd (Zurich) today said it has received all necessary approvals to acquire a majority stake in Kotak Mahindra General Insurance Company Ltd (KMGIC) from Kotak Mahindra Bank Ltd. Zurich has acquired a 70% stake in Kotak General Insurance, a wholly-owned subsidiary of Kotak Mahindra Bank, for ₹5,560 crore (i.e., USD 670 million) via a combination of fresh growth capital and share purchase.

The transaction marks the largest foreign investment in India’s general insurance market and is also the first by a foreign insurer since the foreign direct investment (FDI) limit was raised from 49% to 74% in 2021. "The combined entity will bring to the Indian market -- Zurich and Kotak’s collective commitment to trust, innovation, integrity, and customer service. In due course, the business will adopt a new brand that represents both Zurich and Kotak as shareholders," Zurich says in a statement.

Zurich says it'll work towards helping India achieve its goal of “Insurance for All” by 2047. The company sees India’s general insurance market gearing for substantial growth as "consumers become more aware of the benefits of insurance, continued development of digital and financial infrastructure, and a large and growing middle class". “The acquisition of Kotak General Insurance sets the way forward for Zurich to be a leading player in a very significant growth market – India,” said Tulsi Naidu, CEO - Asia Pacific, Zurich Insurance Group.

Suresh Agarwal, Managing Director & CEO, Kotak Mahindra General Insurance says the deal will catalyse its expansion in the Indian market. "This is a major stride in advancing our mission of enhancing insurance penetration in India through technology, scale, and bringing global best practices to our business to provide value-adding experiences."

The deal between Kotak Mahindra Bank and Zurich Insurance Company was announced in November 2023 and was subject to customary conditions precedent including regulatory approvals from the Reserve Bank of India, the Insurance Regulatory and Development Authority of India, and the Competition Commission of India. "All necessary approvals have been received," says Zurich, which boasts of having businesses in over 200 countries and territories.

The gross written premium of the Indian general insurance market was ₹3 lakh crore ($36.5 billion) in 2023, according to London-based data analytics and consulting company GlobalData. It says the Indian general insurance sector growth peaked in 2022 and slowed down the following year majorly due to a decrease in liability, crop, credit guarantee, and marine, aviation, and transit (MAT) insurance premiums. "The growth is anticipated to slow down over 2024–28 at a CAGR of more than 9%."

According to the IRDAI data, there are around 27 general insurance players in India, including players like Shriram General Insurance Company Ltd, Tata AIG General Insurance Company Ltd, and New India Assurance Company Ltd, among others.

Amid the deal, shares of Kotak Mahindra Bank surged 1.39% to ₹1,743.50 apiece on BSE today.