Zurich Insurance Group has acquired a 70% stake in Kotak General Insurance, making it the largest foreign investment in India's insurance sector since the FDI limit was raised to 74% in 2021. Tulsi Naidu, the CEO of Zurich Insurance Group, believes that owning and operating their own business in a significant market like India is essential. The company has been considering investing in India for a long time, especially after the liberalization of FDI rules in the insurance industry.
After completing its acquisition of a 70% stake in Kotak General Insurance last week, Zurich Insurance Group is aiming to become a leading player in the rapidly growing Indian market. The Rs 5,560 crore deal makes it the largest foreign investment in the sector. It’s also the first stake acquisition by an overseas insurer since the FDI limit was raised to 74% from 49% in 2021. Tulsi Naidu, CEO, Asia Pacific, Zurich Insurance Group, spoke to Shilpy Sinha and Arijit Barman about he growth strategy. Edited excerpts:
India opened up the insurance sector to foreign firms in 2000 and raised the FDI limit in 2021. Are you late to the market?
The biggest thing that has always been important to us as a strategic investor is being a long-term player. If you look at Zurich’s history, we've consistently grown in global markets. We entered Switzerland in 1872, the US in the 1920s during the American century, and now we’re growing in Latin America and Asia. We believe India is an important market, and with the relaxation of FDI rules a few years ago, we started considering how to establish our presence here.
For us, owning and operating our own business and contributing to the market is essential. In a significant market like India, we want to be fully present.
You valued the company at $1 billion, over five times the gross premiums earned by the company in FY24. It’s loss-making after seven-eight years in operations.
We have paid $670 million or Rs 5,560 crore for a 70% stake with a combination of secondary sale and capital into the business to drive future growth. Obviously, looking at the post-money valuation doesn’t convey the whole picture and the multiple needs to be looked at on a pre-money basis and reflects the performance and prospects of the business. As a long-term investor, we want to establish a solid foundation in the large and fast-growing Indian insurance market. We've considered investing in India for a long time, especially after the liberalisation of FDI rules, and we believe this investment lays the foundation for us becoming a leading, relevant player in this market. Our strong conviction in the Indian market opportunity, the quality of the partnership, the unique opportunity to take majority control and the existing business being at an inflexion point were crucial factors in how we thought about this opportunity.
On the one hand, you have almost two dozen life and two dozen general insurance plans already. On the other, everyone talks about opportunity, low density, low penetration. How do you balance both?
There are great businesses in the sector, but the market still has room to grow, and there's space for all of us in the sector to contribute to that growth. We bring a unique set of skills as one of the world's leading commercial insurers, with deep technical experience to handle complex risks. In a market where the corporate sector and infrastructure are expanding, our expertise is invaluable. We focus on long-term participation and creating products that suit the local market, working closely with distributors, other insurers, and reinsurers to craft solutions.
You have also brought in growth capital of Rs 1,600 crore. Will it take care of growth in the near term?
The business is well capitalized and has sufficient resources for its foreseeable needs, as per the business plan and regulatory expectations. We're focused on developing and growing the business rather than targeting specific market share numbers at this stage. Our plan involves maintaining the 40% growth the business has seen in recent years, which will triple the business in some lines over the next two to four years.
Is there a plan in place for hiring talent?Yes we are aiming to build the business. Over the next couple of years we will be looking to add 600 or so people. Our focus is on talent development in specific areas like commercial insurance, digital, analytics and distribution management. We're also mindful of operating leverage, aiming for a more digital, simplified, and efficient business model with a strong focus on the customer.
When do you see the India business becoming a meaningful contributor to Zurich’s balance sheet?Zurich has in excess of $60 billion in insurance revenues and fees globally and we are growing steadily including double digit growth in the APAC region. It will take some time for the India business to become meaningful in the context of that kind of scale.
Are there models or templates that you can replicate in India from other emerging economies in Asia?
We are one of the most diversified global insurers and so yes, we see relevant models across the region and globally -- ranging from traditional distribution partners such as agents, banks and financial institutions, brokers, all the way across to digital native partnerships and direct models. And of course there is our global capability in commercial insurance. While India is unique, there are similarities with other emerging markets that we can see. We have examples of providing first access to insurance using digital means and through partnerships, addressing protection and risk needs, and working effectively with partners to enable access and drive growth.
Where do you see untapped potential in the insurance space?
The single biggest opportunity remains the relatively low engagement with insurance resulting in low penetration and so there is significant untapped potential in various areas. To take some examples, home insurance and SME insurance are not highly penetrated. The commercial coverages have a lot of room for development. Financial lines, especially for MSMEs, are lower compared to other markets. There is a lot of innovation that is possible and distribution is the key. Ultimately, we are motivated by the IRDAI’s goal of insurance for all by 2047.
What is the future of digital-only insurance players in India?
India has world-leading digital infrastructure and digital is playing a crucial role in increasing insurance engagement, access and adoption, as people increasingly adopt online interactions and services. When it comes to digital-only vs more broad-based business models, this is down to the customer.There will be customers who will always want to deal through more traditional channels or have access to omnichannel experience where digital still has a role to play. Others will prefer pure digital only interaction. At Zurich, we are comfortable with a range of models -- our job is to serve the customer. That’s what we are about.
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