Munich Re set to revive talks with Reliance

Munich Re, the reinsurance major, has decided to revive talks with the Reliance group for setting up a reinsurance company in India after the general election in the country was over.

Senior officials from Munich Re said that both the companies were delaying finalisation of any sort because the country was faced with a election and we hope to revive talks with the largest industrial group after about six months.

"We are delaying things because of the election and would revive talks on holding pattern and other details after the election," he added.

"It was put on hold for the time being but we are up beat about a joint venture with Reliance," he explained.

Reliance has, in fact, already signed a memorandum of understanding (MoU) with Munich Re sometime back with the idea of floating a joint venture in India and had also received an informal approval from the Insurance Regulatory Development Authority (Irda).

Officials said that the issue of management control could be sorted out through a mutual understanding once both the parties starts discussion on the matter.

The largest reinsurance company, Munich Re already has liaison offices in metros where insurance companies are head quartered and has also bagged substantial reinsurance volumes from Indian insurers in the past.

At present a portion of risk has to be compulsorily transferred by insurance companies to General Insurance Corporation of India (GIC) while the rest of the risk can be parked with foreign companies.

With the government's intention of taking away the monopoly position of GIC thus doing away with the compulsory practice of reinsuring a portion of risks by insurance companies with GIC, Munich Re and other reinsurance majors like Swiss Re will find increased opportunity in the domestic market in the segment.

It was with this intention that foreign reinsurance majors were looking at presence in India where it could increase its business volumes.

The Indian government has allowed 26 per cent stake in reinsurance companies around a couple of years back but no entity as yet has tied up with any Indian group for setting up one.

Industry watchers said that most of them were waiting for GICs monopoly power to be withdrawn after which they would be investing in the country.

Nevertheless, sources close to the development said that the joint venture was being considered with Munich Re paying a premium on the stake that it intends to take and Irda had asked both the parties to keep it informed over the developments.