Monday, November 27, 2006

Dozen Indian banks to enter insurance

Mumbai: Nearly a dozen Indian banks are planning to enter the life and non-life insurance sectors, attracted by the explosive growth of the insurance industry, especially 'bancassurance.'

International insurance majors are also vying to tie-up with leading nationalised banks. Some of the banks, like Union Bank of India, are being wooed by multiple players, eager to rope in state-owned unit for their insurance forays.

At least four companies are learnt to be keen on taking on Union Bank as a partner. They include Japan's Dai-Ichi Mutual Life Insurance, which has tied up with Bank of India (BoI), Italian insurer Generali, which has tied up with the Pantaloon group; Germany's Ergo Insurance; and even Bharti Axa Life Insurance, which has already started operations.

Telecommunications giant Bharti, which has a 74-per cent stake in the new venture, while French partner Axa has the rest, has to sell off a part of its stake in due course. Getting a bank like Union Bank will help it in increasing market penetration. Union Bank is also on the look out for a 26 per cent stake in a life insurance venture.

Dai-Ichi had roped in BoI and Andhra Bank for its insurance venture in India, but the latter walked out of the arrangement as it did not want to be a junior partner and wanted more than 23-per cent stake that was being offered.

The Insurance Regulatory and Development Authority (IRDA) has imposed a 49-per cent ceiling on a bank's equity stake in an insurance company, while there is a 26-per cent limit on foreign equity. Most Indian banks are reluctant to be junior partners in the venture, with a mere 26-per cent holding.

BoI and Union Bank already have an alliance covering loan syndication, international banking and training. But it is still not clear whether Union Bank would agree to a lower stake than BoI in the insurance venture with Dai-Ichi.

A similar arrangement involving two banks (one large and the other a regional player) and an international insurer has just taken off. IDBI Bank has inked a deal with Federal Bank and Fortis, to start a new life insurance company. IDBI Bank will have a 48-per cent stake, and Federal Bank and Fortis 26 per cent each.

Other leading banks keen to enter the business include Bank of Baroda, Canara Bank, Punjab National Bank (PNB), and Oriental Bank of Commerce. PNB has tied up with UK-based major Principal and Vijaya Bank, while the other banks are finalising their partners.
Three banks - Allahabad Bank, Karnataka Bank and Indian Overseas Bank - have tied up with Japan's Sompo Insurance and the Dabur group, to float a non-life insurance company.

The Indian insurance sector has grown phenomenally. In the first half of the current fiscal with new premium income of the 16 send this article to a friendinsurers ballooning by 162 per cent to almost Rs30,000 crore. The dozen non-life insurance players saw a modest 23 per cent growth in premium (to Rs12,400 crore), though the business is expected to expand rapidly from next year, following 'detariffication.'


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