The Hindu : Business : Federal Bank, IDBI, Fortis to form new life insurance venture

Online edition of India's National Newspaper
Thursday, Jul 13, 2006

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Business

Federal Bank, IDBI, Fortis to form new life insurance venture

Staff Reporter

IDBI to have 48 per cent stake in the entity

KOCHI: Federal Bank, Industrial Development Bank of India and Fortis, an international banking and insurance company, have joined hands to form a life insurance company in India. A memorandum of understanding for forming the new venture was signed here on Tuesday by representatives of the three entities.

M. Venugopalan, chairman of Federal Bank; D. Zeings, chief executive officer, Asia, Fortis Insurance International, and V.P. Shetty, chairman and managing director of IDBI, signed the MoU at the Federal Towers in Kochi.

At a joint press conference, they said the IDBI would have 48 per cent ownership in the joint venture while the Federal Bank and Fortis would have 26 per cent each.

The products of the new venture are likely to be launched in the market by next year, after getting the necessary approvals. Federal Bank will terminate the existing tie-up with another insurance company once the joint venture comes into effect, the bank chairman said. It was also disclosed that Fortis would be ready to step up its ownership as per FDI regulations.

In India, life insurance products account for only 2 per cent of the Gross Domestic Product vis-à-vis 5.5 per cent in industrialised countries. As the per capita income level of the nation is steadily moving forward, there will be surplus funds in the hands of people. The percentage of working population to the total population is also increasing. These are pointers to the untapped potential, Mr. Venugopalan said.

Private insurers operating in the country for the past five years have taken more than 26 per cent in both the life and non-life segments. Only a few banks in India have gone for setting up a vehicle for insurance business. Barely 10 per cent of Indian households have life insurance cover and only 1 per cent has medical insurance. The life insurance premium per capita is just Rs.720 per annum, he pointed out.

It is envisaged that the new company will utilise the distribution network of the banks and agents/brokers. Online processing will be adopted for servicing and operations.

Fortis group was created by the cross-border merger of well-known financial institutions in Belgium and Holland.

The company ranks among 20 largest financial institutions in Europe, according to Mr. Zeings.

IDBI is a major player in Indian banking sector and plans to increase its branch network to 500, its CMD said.

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