While regulations now permit foreign insurers to increase their stakes in Indian entities, there seems to be little assurance that their Indian counterparts will play along.
This is a longstanding challenge, as foreign insurers continue to grapple with expanding their foothold in local companies, with several choosing to exit partnerships altogether.
A notable example of this trend emerged in 2023 when Abrdn Plc (formerly known as Standard Life Aberdeen) ended its partnership with HDFC Life. The collaboration, which began in 2000 as a joint venture between Standard Life and Housing Development Finance Corporation (HDFC), had seen Abrdn’s stake reach 34.75 percent by the time of HDFC Life’s listing in 2017.
HDFC Life soon expanded, achieving a 7.8 percent market share and recording Rs 23,876.54 crore in new business premiums by FY23. At the end of that financial year, HDFC’s stake had risen to 48.65 percent. Moreover, it had approval from the Reserve Bank of India (RBI) to exceed 50 percent in the insurance arm. This meant Abrdn was in an increasingly marginal position, ultimately prompting its complete exit.
Vibha Padalkar, CEO of HDFC Life, had told Moneycontrol earlier that the decision to allow 100 percent foreign direct investment (FDI) in the insurance sector may not even significantly alter competition dynamics. While the move could attract foreign insurers or investors seeking full control, past FDI increases did not result in substantial capital inflows, she had said.
Moreover, she had pointed out, since the time the FDI limit was raised to 74 percent, only three companies in the life insurance sector utilised the cap, which is just over 10 percent of all companies in the field.
"Moreover, I would not say those three companies have seen a significant shift in their market share as a result, either," she had said.
HDFC Life's shift toward self-reliance is no anomaly.
Take ICICI Prudential Life Insurance, which went public in 2016, a move, according to the regulatory filing, "rooted in its own evolution with foreign partner Prudential Plc".
The UK-based Prudential entered India in 2000, picking up a 26 percent stake in a joint venture with ICICI Bank.
By the time of its initial public offering in 2016, the company had established itself as a key player in the insurance sector, with a reported new business premium of Rs 19,102 crore for FY16 and a growing customer base.
The public listing, which valued ICICI Prudential Life at over Rs 48,000 crore, diluted Prudential’s stake, dropping it below the original 26 percent, while enabling ICICI Bank to maintain its majority control, with its shareholding settling at around 55 percent post-IPO.
All this serves as the backdrop to another significant separation—the recent dissolution of the Bajaj-Allianz partnership.
Allianz recently sold its 26 percent stake in Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance to Bajaj Finserv for a staggering Rs 24,180 crore, paving the way for the Bajaj Group to take full control of both entities. It also marked the end of a 24-year-long partnership that began in 2001.
It joins the string of recent exits, but its story reveals deeper currents.
In 2001, the Insurance Regulatory and Development Authority of India (IRDAI) opened the doors to FDI with a 26 percent cap, aiming to inject much-needed capital into a market long dominated by state-owned entities.
Private insurers, starved of resources, welcomed foreign players like Allianz, which brought not just funds but also technical expertise to a relatively nascent industry.
Bajaj Allianz emerged as an early success story, with Allianz’s initial stake fuelling the joint venture’s rapid expansion. For years, the partnership thrived. By 2023, Bajaj Allianz General Insurance boasted a 7.3 percent market share, making it India’s most profitable non-life insurer, while Bajaj Allianz Life Insurance held a 5.8 percent slice of the life segment.
New business premium growth soared with 21 percent for life and 33 percent for general, backed by solvency ratios of 432 percent and 349 percent, respectively.
Yet, beneath this, subtle strains were starting to surface.
The first tremors came in 2015, when the FDI cap rose to 49 percent. Several reports suggest that Allianz actually began eyeing a larger stake as early as 2014, anticipating regulatory shifts.
However, Bajaj, holding the majority, remained firmly in the driver’s seat. Strategic decisions flowed from Bajaj, leaving Allianz increasingly sidelined. Allianz, according to Bloomberg, felt it had “no meaningful influence over strategic choices”.
According to reports, in 2016, Allianz even pushed for a larger stake at a discounted price, only to be rebuffed by Bajaj. The German insurer resisted earlier buyout attempts by Bajaj, but by October 2024, the partnership had hit a wall, when reports surfaced of Allianz beginning to explore alternatives.
Even as regulatory ceilings on FDI rose from 26 percent in 2001 to 74 percent in 2021, with 100 percent ownership already announced this year, the power balance has tilted decisively toward domestic giants.
Consider Bharti Enterprises, which parted ways with AXA in 2020, buying out its 49 percent stake in Bharti AXA Life Insurance after merging their general insurance arm with ICICI Lombard. According to reports, “strategic and financial considerations” fuelled this move, as Bharti sought to steer its life insurance business independently.
Some of the earlier splits include New York Life selling its 26 percent stake in Max New York Life Insurance (now Max Life Insurance) in 2012, citing modest returns; ING exiting ING Vysya Life Insurance (now Exide Life Insurance) in 2013 amid global restructuring; and Royal Sun Alliance leaving Royal Sundaram General Insurance in 2014, battered by underwriting losses.
Each departure reflects a common pattern: foreign insurers, once vital partners, struggling to adapt as Indian firms outgrow their need for external support.
Ironically, these exits coincided with a regulatory environment designed to lure foreign capital.
The FDI cap’s climb to 74 percent in 2021 had sparked swift action from some: Italy’s Generali, Belgium’s Ageas and Britain’s Aviva all boosted their stakes to 74 percent in their respective Indian ventures.
Yet, adoption remained tepid with only these three life insurers having embraced this move.
When Moneycontrol spoke to executives of insurers such as ICICI Prudential Life, Aditya Birla Health Insurance, Axis Max Life Insurance and ACKO Life Insurance, the response was unanimous: they see “little need for foreign partners” as they are well-funded.
According to analysts from brokerage firms, the evidence hints that more exits could potentially take place. "Misaligned priorities can erode even the sturdiest alliances," one of them said.
However, the industry voices added, not all foreign players are retreating. “Those able enough to secure majority stakes or forge aligned partnerships may still thrive,” said the person cited above.
Moreover, foreign players such as Allianz are not abandoning India entirely.
On March 20, 2025, the German company inked a preliminary deal with an Indian entity to launch a new insurance joint venture. This partnership, now in its final stages, could see Allianz pursue a majority stake or, at a minimum, secure governance rights with an eye toward future control, as per Bloomberg.
According to analysts, Allianz’s intentions are clear. "It wants to operate its own insurance business in India, taking full advantage of the liberalised regulatory environment,” said one of them.
With Finance Minister Nirmala Sitharaman recently announcing amendments to allow 100 percent foreign ownership and introducing composite licences, blurring the lines between life and general insurance, the opportunity may only widen, industry observers said.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
