Money & Banking

Max Life seeks IRDAI nod to launch subsidiary

KR Srivats New Delhi | Updated on October 17, 2021

Expects approval in the next few weeks, says MD and CEO

Max Life Insurance (MLI) has sought insurance regulator IRDAI’s approval to set up a subsidiary to undertake pension fund management business, said Prashant Tripathy, Managing Director & CEO.

Pension regulator PFRDA had recently granted approval to MLI to become a sponsor of a pension fund manager.

“Our foray into pension fund management business is part of our aspiration to become a prominent player in the retirement space. This fits into that overall strategy. This is another extension of our fund management play. It is not for the next one year. It is really a macro view of how the pension sector will evolve in the next 10 years. It shouldn’t be seen as business of tomorrow, but as a business of the next decade,” he said.

Initial capital

Tripathy said he expects the IRDAI approval to set up the dedicated subsidiary in the next few weeks and that MLI will initially put in an initial capital of ₹50 crore, the minimum capital stipulated in the regulatory norms.

“We have written to the IRDAI to seek their approval. For any entity to be a subsidiary, you need approval of regulator and it is going to be subsidiary of Max Life Insurance. There are precedents where the regulator has allowed these entities to be created as part of life insurance, and we will create this subsidiary as part of life insurance.

“Over the next 5-6 months, we will set it up with independent entity, board, governance etc. We are now kickstarting the process,” he said. MLI Pension Fund – based on current preliminary estimates – aims to manage ₹10,000-crore Assets Under Management (AUM) within five years from the launch of the pension fund management company.

Growth of NPS

Currently, there are eight PFRDA-approved pension fund managers in India. Tripathy highlighted the robust growth in National Pension System (NPS), which has exceeded ₹6.5-lakh crore and growing at a CAGR of 35 per cent.

“NPS has seen good traction and it is becoming chunky. Pension, as a category, is going to be very large and managing the funds and being clued on to the ecosystem of PFRDA is also important to be able to become a prominent player in this retirement space. Fund Management is core to our business, and we just crossed AUM of ₹1-lakh crore on the retail front,” he said.

To encourage wider participation, the PFRDA has also given incentives for private participants in this space, giving more flexibility on fees that was low till recently, said Tripathy.

“We have capability, we have the mandate to operate in retirement space because we operate in annuity.

“We are the fourth-largest annuity provider among private players. It’s a part of looking at the entire value chain,” he said.

Noting that India’s pension assets to GDP is still low, Tripathy said that overall retirement space is going to grow. “Percentage of our people more than 60 years, it is 9.9 per cent in 2020. It was 7.8 per cent in 2010 and it will only increase by 300 basis points in 10 more years. There is a demographic shift and more and more people will be in retired,” he added.

“We have big plans in retirement space, and this is just an element in the impactful participation that we want to be in. Also from a branding perspective, if you are a retirement player, people do expect you to be present in the entire value chain. About two years ago we took licence of Annunity Service Provider (ASP) that PFRDA grants. We provide annuities. Now we got licence for pension fund management.”

‘Not a late entrant’

Tripathy also maintained that MLI was not a late entrant in pension fund management although eight other players are already in this space. “ Maybe I am late to the party. Party began only at 8 pm. But guess what ..the party will be there for the entire night…Retirement is going to be a big category for several players to thrive,” he said.

Published on October 15, 2021

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