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Business News/ Companies / News/  Fairfax-backed Go Digit gets green light for life insurance

Fairfax-backed Go Digit gets green light for life insurance

India's insurance regulator has granted approval for Go Digit Life Insurance, which will be backed by Canadian billionaire Prem Watsa's Fairfax Financial Holdings. The new firm will become the country's 25th life insurer and is expected to start with an initial capital of INR7bn-INR10bn ($95m-$136m). Fairfax is likely to hold a 30%-40% stake in the joint venture initially, with Go Digit Infoworks owning 80% of Go Digit Life. The life insurer may also place minority stakes with certain banks to strengthen its bancassurance network.

Prem Watsa, chief executive officer of Fairfax Financial Holdings Ltd. (Bloomberg)Premium
Prem Watsa, chief executive officer of Fairfax Financial Holdings Ltd. (Bloomberg)

Mumbai: India’s insurance regulator on Friday granted its approval for Go Digit Life Insurance Ltd, which will become the 25th life insurer in the country.

On 1 June, Mint first reported that Go Digit, backed by Canadian billionaire Prem Watsa’s Fairfax Financial Holdings Ltd, will launch a life insurance company in the next six months.

The Insurance Regulatory and Development Authority of India (Irdai) said in a statement, “Irdai, in its 122nd meeting held on 2 June 2023, has granted the certificate of registration to a new life insurer, namely, Go Digit Life Insurance to carry life insurance business in India."

India’s life insurance sector clocked a new business premium of .3.7 trillion in 2022-23.

Currently, Watsa’s Fairfax, in a tie-up with insurance industry veteran Kamesh Goyal, owns Go Digit General Insurance Ltd, a general insurance company.

The new life insurance joint venture is likely to have Fairfax effectively holding a 30-40 % stake initially, according to a person familiar with Go Digit’s plans. The company may start with an initial capital of 700 crore- 1,000 crore, the person said on the condition of anonymity.

Go Digit Infoworks, as the holding company, will own 80% of Go Digit Life. Later, the life insurance company may place minority stakes with certain banks to strengthen its bancassurance network. This may lead to a proportionate reduction in stakes held by the partners, including Fairfax, the person added.

Apart from Digit Insurance, Fairfax’s investments in India include Bengaluru International Airport, IIFL companies, National Stock Exchange, Sanmar, Fairchem Organics, Catholic Syrian Bank and Thomas Cook India.

Prior to backing Digit Insurance as a co-promoter, in 2019, Fairfax had sold its entire stake in ICICI Lombard General Insurance Co. Ltd for 2,626.5 crore, ending its 18-year partnership as an investor.

Go Digit Infoworks Services or Digit Insurance, is the only startup bet so far by the Canadian investment behemoth in India. The startup, founded by Goyal, was the first unicorn of 2021, a year that saw an entrepreneurial boom with 44 new unicorns. FAL Corp. owns 45.3% of the holding company, Go Digit Infoworks Services Pvt. Ltd, which in turn owns an 83.47% stake in Go Digit General Insurance.

On the other hand, Goyal and Oben Ventures LLP together hold 14.96% and 39.79% in Go Digit Infoworks.

SBI Life Insurance is the largest private life insurer, with a new business premium collection of 29,587.6 crore in FY23. State-run Life Insurance Corp. of India (LIC) is the country’s largest life insurer, with a first-year premium of 2.32 trillion and a market share of 62.58%.

Watsa and Goyal’s proposed JV will be entering life insurance at a time when the industry is faced with a new challenge with regard to growth due to changes in taxation rules, especially for the affluent. According to the new rules, the proceeds from any life insurance premium over an annual premium of 5 lakh would be taxable from FY24, which began on 1 April.

However, according to the person cited above, initially, Fairfax’s proposed Indian life insurance firm will primarily design small-to-medium ticket-size policies. And to do this, Go Digit’s life insurance company is looking to enter into distribution agreements with multiple Indian banks.

To be sure, Go Digit Life Insurance has already roped in private lenders Axis Bank Ltd and HDFC Bank Ltd, which will hold 9.9% each as strategic partners, in lieu of an investment commitment of around .70 crore by each in the proposed privately-held life insurer.

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Anirudh Laskar
Anirudh Laskar is a senior editor at Mint, with 17 years of experience. He has reported on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the financial services industry. Based out of Mint’s Mumbai bureau, Anirudh has worked with Business Standard and The Telegraph before joining Mint in 2009.
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Updated: 09 Jun 2023, 11:26 PM IST
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