Zurich Insurance Group will buy a 51 per cent stake in Kotak Mahindra Bank’s general insurance arm for about US$487 million, giving the European insurance giant a foothold in India’s fast-growing insurance market.

The news, which was confirmed by the companies on Thursday (Nov 2) and Reuters first reported in June, will be the largest investment by a global insurer in an Indian non-life insurer. It boosted Kotak shares as much as 2 per cent.

“This development is just a matter of getting access to India, one of the key growth markets,” said Emkay Global analyst Avinash Singh said. “To start from scratch, it would have taken much longer to build a brand visibility.”

“While Kotak General is not among the top players in the sector, the Kotak brand as such will give Zurich a good headstart,” he added.

Kotak General Insurance competes with larger rivals HDFC ERGO and Bajaj Allianz, which also count foreign insurers as investors.

Asia’s third-largest economy in 2021 relaxed the cap for overseas investment in the insurance sector, allowing acquisition of majority stakes of up to 74 per cent against 49 per cent permitted earlier.

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More than 30 companies operate in India’s general insurance market, where annual premium collections grew 11 per cent to reach US$26.7 billion in 2021-22, helped by rising financial literacy and income levels, said a CareEdge Ratings report.

The deal comes as Kotak Mahindra Bank said last month the central bank approved the appointment of veteran international banker Ashok Vaswani as the bank’s chief executive officer after founder and billionaire Uday Kotak announced plans to step down.

Zurich Insurance’s stake purchase will give Kotak General Insurance a post-money valuation of about US$954.53 million, according to an exchange filing.

Zurich Insurance, a unit of one of Europe’s largest insurers, will buy an additional 19 per cent stake in Kotak General Insurance within three years, the companies said.

The deal is subject to regulatory approval from India’s central bank, insurance regulator and antitrust regulator, the statement said. REUTERS