New Delhi: Insurance regulator IRDA has approved 26 percent stake transfer in Max New York Life Insurance (MNYL) to Japan's Mitsui Sumitomo Insurance Company.
"Max NY Life has received IRDA's approval for the partner's stake transfer," a source in the know said.
With the stake transfer, the US-based New York Life will exit from the joint venture with Max India. Max India is the holding company of MNYL which is a joint venture between Max India and New York Life.
Earlier this month, the Competition Commission of India (CCI) had approved the stake transfer between the companies saying that it would not have an "appreciable adverse effect on competition in India".
According to the share purchase agreement, Mitsui Sumitomo will acquire 16.63 percent equity share capital of MNYL from New York Life and 9.37 percent from Max India.
By way of a separate agreement, New York Life has sold its 9.37 percent shares in MNYL to Max India.
Subsequent to the proposed combination, New York Life would completely exit from MNYL, and Max India and Mitsui Sumitomo would control MNYL with Mitsui having 26 percent shareholding.
After the arrangement, Max India would be the largest shareholder holding 69.78 percent of equity capital of MNYL. Besides, Axis Bank continues to hold the balance 4 percent.
Japanese insurance company Mitsui Sumitomo and its subsidiaries are mainly engaged in non-life insurance business across the globe. And it is not engaged in life insurance sector in India.
It is present in India through its investment in Cholamandalam-MS General Insurance Company with 26 percent equity shares and in Cholamandalam-MS Risk Services with 50 percent share.
Cholamandalam-MS General Insurance is engaged in general insurance business in India and Cholamandalam-MS Risk Services is engaged in risk management and engineering solutions in the fields of safety, health and environment.
As per the existing laws, FDI up to 26 percent is allowed in the insurance sector under automatic route.
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.
In 2010-11, the top five companies in India accounted for around 87 percent of the business. While, LIC is the largest player with about 69.78 percent market share, the market share of MNYL in life insurance industry is only 1.99 percent.