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The story begins some years back when a certain MNC broker forms a stranglehold on fleet aviation business due to the massive premiums paid by a leading private airline. This is leveraged to get best terms for other large aviation accounts. For many years competing brokers try to break in but are unsuccessful.
In comes an upstart with 'strong political connections'; all the incumbent brokers hate him (often forgetting they went or would go the same path if they had a chance). He uses this political connection in the current regime (reputedly with a moneybag) and has 'fatwas' issued for change of insurance bids. The upstart ties up with the MNC broker's bitter competitor and they go out in the market.
Their bid is a few thousand dollars less! Whether this is good broking or good politics will for ever remain speculation. But hey, the incumbent has not given up. He puts a spoke in the wheel. He says one of the tender conditions remain unfulfilled.
here we come to the understanding or lack thereof of how London works. The concept of underwriting agencies is lost on most Indians especially insurance industry people. Simply put, the man with expertise rents the balance sheet of a strong player and both benefit - the brains gets financial strength and the latter gets better return on investment.
insurers 'subscribe' to the total capital deployment of the u/w agency. So if an u.w agency needs USd 10 mln capital , 10 insurers can subscribe 10% each, sharing the profits after paying a fee to the agency manager. Not unlike AMCs.
The problem in Air India is that the tender document says that the "lead underwriter" must have led similar size accounts with a 10% line.Leads can be with 5% subscription as well but obviously the incumbent has put 10% to ward off competition.
Now Mitsui is a 'subscriber' to Global Aerospace and not the 'underwriter'. The underwriting agency is Global Aerospace. Mitusi has quoted independent of GA- technically its not a 'leader'.
Second a 9.8% stake in GA is exactly that - and not 10%. You cannot round it off simply because if there were a USD 1 billion loss Mitsui would shell out USD 98 million not USD 100 million.
technically New India is correct. But more than that just the process of putting a spoke in the decision making means quotes which usually have a 30 day validity expire. You have to re tender then. And who knows what that will bring?
Watch out for the next episode of this drama!
