Japanese insurer Sompo''s JV with Allahabad Bank to finally take-off

Japanese insurance giant Sompo's entry into the Indian non-life insurance sector appears to be on track finally, with all the partners getting ready to sign the shareholders agreement over the coming days.

According to A C Mahajan, chairman and managing director, Allahabad Bank — which is one of the major partners in the proposed venture — following the shareholder's agreement, documents will be filed with the Insurance Regulatory and Development Authority (IRDA).

The new venture, in which Sompo Japan Insurance will have a 26-per cent stake, includes Allahabad Bank (with a 30 per cent stake), Indian Overseas Bank (19 per cent), Karnataka Bank (15 per cent), and the non-bank partner, Dabur (10 per cent).

The general insurance segment has not attracted many international players because of price controls in the tariff regime, under which insurance companies were not allowed free play while fixing premiums. However, the IRDA is introducing a de-tariffied regime from early 2007, which is expected to result in many new international majors to rush into the sector.

Sompo had floated the proposal for a joint venture earlier this year, but its move was stalled when Japanese regulator, the Financial Services Agency (FSA), froze attempts by the company to venture abroad for a three-month period. The three-month suspension order was a result of 'misconduct' by the Japanese insurance company. Twenty-five other Japanese insurance firms had also been penalised by the FSA.

But with the suspension orders having been revoked, Sompo is proceeding with its plans for the new joint venture in India. The new company will have an initial paid-up capital of Rs200 crore.

Sompo had earlier signed a memorandum of understanding with the Essar group to set up a non-life insurance company, but the proposal failed to take-off. Sompo is the third Japanese insurance entering the non-life sector in India; the other two include Tokio Fire and Marine (which has a tie-up with Iffco) and Mitsui Sumitomo (with Cholamandalam).