New Delhi: British financial major Aviva Plc's reported plans to exit Indian market is unlikely to affect the operations of insurance firm as majority partner Dabur may rope in another overseas investor as replacement.
There have been similar instances in the past where foreign promoters quit by selling stake to other overseas entity or the domestic joint venture partner. However, the company remained in existence and there was no disruption in insurance business.
Last year, US-based insurer New York Life had exited India by selling its 26 percent stake in its joint venture company to Japan's Mitsui Sumitomo Insurance Company.
Notwithstanding change in shareholding pattern and change in the name to Max Life, the business continued as usual.
According to industry experts, there are two options before the UK-based financial services major Aviva, one is to find another overseas life insurance player and sell its 26 percent stake. The other is to sell its stake to Dabur.
As part of restructuring, Aviva Plc is looking to cut costs and exit less remunerative markets to improve its financial performance.
Regulatory authority has to ensure that in case of mergers and acquisition, interests of various stakeholders are protected, Ernst & Young national leader (global financial services) Ashvin Parekh said.
Protection of interest of the policyholders is one of the key objectives of the insurance sector regulator Insurance and Regulatory Development Authority (IRDA), he said.
The change in shareholding is vetted by the regulator which ensures that the promoter is fit and has enough financial strength to carry on the business without compromising interest of the policyholders, Optima Insurance Brokers CEO Rahul Aggarwal said.
So, there is unlikely to be a major impact on the Indian joint venture of Aviva Plc, Aggarwal added.
Earlier this year, the Netherlands-based ING decided to exit ING Vysya Life Insurance Company by selling its 26 percent stake to domestic partner Exide Industries.
ING's exit from the Indian life insurance joint venture is part of the previously announced divestment of ING's Asian Insurance and Investment Management businesses, the Dutch banking and insurance company had said in a statement.
According to Parekh, foreign players are exiting India because the markets have changed and they are facing problems in their own country.
Indian insurance sector has 42 private players in life and general insurance business sharing about 30 percent of the market share in life insurance and 41 percent of the market share in general insurance sector.
First Published: Tuesday, August 6, 2013, 19:00