A simple way to achieve what you want:
import cv2
s_img = cv2.imread("smaller_image.png")
l_img = cv2.imread("larger_image.jpg")
x_offset=y_offset=50
l_img[y_offset:y_offset+s_img.shape[0], x_offset:x_offset+s_img.shape[1]] = s_img
Update
I suppose you want to take care of the alpha channel too. Here is a quick and dirty way of doing so:
s_img = cv2.imread("smaller_image.png", -1)
y1, y2 = y_offset, y_offset + s_img.shape[0]
x1, x2 = x_offset, x_offset + s_img.shape[1]
alpha_s = s_img[:, :, 3] / 255.0
alpha_l = 1.0 - alpha_s
for c in range(0, 3):
l_img[y1:y2, x1:x2, c] = (alpha_s * s_img[:, :, c] +
alpha_l * l_img[y1:y2, x1:x2, c])