Munich Re has secured a stake in one of India's largest insurance groups, Housing Development Finance Corporation (HDFC) - a group which Sydney-based IAG had high hopes would be its entry vehicle into the country's market.

The German reinsurer's general insurance unit, Ergo, has agreed to buy a 26% stake in HDFC for an undisclosed sum. Market sources have priced the stake at about $US50 million ($54.5 million).

IAG and US-based Travelers were the other suitors in HDFC's eight-month search for a partner to replace Chubb, which sold its share back to HDFC after conflicts emerged over the direction of the business.

IAG was tipped as the frontrunner in June, when undisclosed sources claimed the company had outbid its rivals.

India's insurance market is growing at an annual rate of 15%, while non-insurance is growing up to 80% a year in some parts of the country.