Just short of a year after threatening to surrender their licence, the promoters of India's first private reinsurer ITI Reinsurance Ltd have announced the sale of their holding in it to Go Digit Infoworks Services Private Ltd, backed by the Canada-based Prem Watsa promoted Fairfax group.
As per the agreement signed on June 26, The Investment Trust of India will also transfer 21,74,40,000 equity shares of Rs 10 each in ITI Reinsurance to Go Digit Infoworks Service.
As to the sale price, The Investment Trust of India said: "Subject to the terms of the share purchase agreement, the total consideration for sale of all shares will be an amount equal to the net asset value (as determined in accordance with the terms of the share purchase agreement) plus a premium of Rs 131,039,882.
"The pro-rata amount of such consideration (i.e. proportionate to the shares of ITI Reinsurance Limited transferred by the Company i.e. 80 per cent) shall be paid by Go Digit Infoworks Services," it added.
Asked to comment, The Investment Trust of India promoter Sudhir Valia told IANS: "I will speak to you when I am free."
Last July, Valia told IANS that they are willing to surrender the reinsurance licence finding the regulations on reinsurance - an insurance for primary insurers or those who sell policies to the public - "illogical" and an uneven playing field for a whopping investment of Rs 500 crore.
"We are willing to surrender our licence if the division of obligatory cession continues to be skewed and other regulations are not suitably changed," he had said.
According to the regulatory filing, it will take around three months to conclude the deal with Go Digit Infowork Services as regulatory approvals have to be secured.
It is learnt the parties to the deal will be approaching the Insurance Regulatory and Development Authority of India (IRDAI) on Monday.
Interestingly Go Digit Infowork Services holds the entire share capital of Go Digit General Insurance Limited, a non-life insurance company in India.
"The exit of promoters of ITI Reinsurance does not send out any negative signal but reinforces the fact that reinsurance is really long term business," an reinsurance industry expert, who did not want to be named, told IANS preferring anonymity.
Industry experts also told IANS that the ITI Reinsurance may not be getting any big captive reinsurance business from Go Digit General Insurance.
"First of all, reinsurance is more complex then primary insurance and is a long term business. One cannot look at it in short term perspective," a senior industry expert told IANS.
For ITI Reinsurance - the company will undergo a name change after ownership change - the first priority is to appoint a CEO and other team members, he added.
The earlier CEO of ITI Reinsurance had quit the company couple of months back.
Meanwhile Digit which has applied for a reinsurance licence with IRDAI will withdraw the same following the purchase of ITI Reinsurance.
--IANS
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