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Life insurance joint venture -- Principal team arriving for talks with IDBI

Ashok Jainani

MUMBAI, Nov. 26

THE Industrial Development Bank of India (IDBI) is finally moving ahead with its foray into the life insurance business along with a foreign partner. The likely foreign candidate for the marriage is believed to be Principal Financial Group of the US, wit h which IDBI already has a joint venture in the asset management business.

Initially, IDBI would enter into the life insurance business only. At a later date, it would also pitch in for the general insurance business where it ultimately aims to be a major player.

A high-level delegation from the Principal Financial Group's insurance division is expected here for talks with IDBI between November 29 and 30. The team would meet the IDBI top management for further discussions and for probably inking the agreement, pa ving the way for formalising a joint venture firm initially to commence the life insurance business.

After finalising the foreign partner, IDBI would soon file an application with the Insurance Regulatory Development Authority (IRDA) for registration.

The IDBI Executive Director, Mr T.M. Nagarajan, told Business Line that the application of registration for licence was under preparation and a detailed business plan was being worked out. ``We may not be in the first round of applications cleared by IRD A, but we would definitely be in the second round,'' Mr Nagarajan said.

IDBI delayed its entry into the insurance business as the foreign partner initially insisted on a 50:50 partnership whereas the regulations do not allow foreign holdings in private insurance companies to exceed 26 per cent.

``We are having a dialogue with the Principal Group to extend the partnership, which is working very well in the mutual fund business, to the insurance business as well,'' Mr Nagarajan, who is also Chairman of the IDBI-Principal Asset Management Co. The partnership will later cover the bouquet of investment products such as pension, annuities (retirement plans), life and non-life insurance and mutual funds.

The insurance joint venture company would have enough capital and its networth would be in excess of Rs 100 crore, the minimum stipulated by IRDA. IDBI would hold 74 per cent equity stake in the joint venture while the rest would be held by the overseas partner -- the Principal Group.

The foreign partner would also bring in skills in product development and technology solutions to offer superior products and services in the Indian market. IDBI is also in talks with some of the large re-insuring houses for re-insurance business.

The Principal Financial Group, established in 1879, is known to be a world leader in retirement savings and pension business, asset management, life and health insurance and mortgage banking. It has an asset base of over $117 billion and services more th an 11 million customers in the US, Asia, Australia, Europe and Latin America.