The Insurance Regulatory Authority of India (IRDAI) has rejected a proposal from Go Digit General Insurance Ltd to acquire the two-year-old Indian reinsurer ITI Reinsurance from its current owners, due to a number of issues that violate regulations.
Go Digit, which is owned by Indo-Canadian billionaire Prem Watsa, signed a deal in June 2018 to purchase the reinsurer for Rs 545 crore (US $79 million) from The Investment Trust of India, which is owned by Sudhir Valia, an associate of Sun Pharma promoter Dilip Shanghvi.
The total deal value was equal to the net asset value of ITI Reinsurance plus a premium of Rs 13.1 crore, although no money was exchanged as the parties were awaiting approval from the regulator.
While IRDAI has not revealed its exact reason for rejecting the deal, sources at the Indian Express suggested that the decision related to ITI Reinsurance’s inactivity since obtaining its license to do business in 2016.
The transaction would therefore have equated to a trading of licenses, which is not permitted under IRDAI regulations.
The regulator has also made clear that it will not renew ITI Reinsurance’s license, as the company has not done any business since obtaining it two years ago.
Indian Express quoted officials as saying that, following IRDAI’s decision, Go Digit owner Watson may revive his old plan to float a new reinsurance company in India.
Before attempting to acquire ITI Reinsurance, Watsa formed a reinsurance company called Valueattics Re along with other Indian partners, and had already started the process to obtain a license.