Dai-Chi, BoI, Union Bank, ink life risk JV

Bank of India (BoI), Union Bank of India and Japan based Dai-Chi Mutual Life Insurance today signed an MoU in New Delhi to set up a joint venture life insurance company .

This is the second joint venture between a Japanese insurance company and an Indian public sector bank this month, as Allahabad Bank and Sompo Japan Insurance tied up for a non-life insurance JV on December 5.

This JV seeks to leverage the presence of 5,000 branches of Union Bank and BoI as well as another 1,500 regional rural bank branches sponsored by the two banks. The initial capital for the venture will be Rs 150 crore. Dai-Chi is the secon largest life insurance company in Japan, with a capital base of $21 billion in that country, assets of $276 billion and incoming premium worth $ 29 billion.

"India is the most under insured country in the world. The number of life insurance policies in the country is around 35 million, while the population is 1.10 billion. Hence, there is a great scope for life insurance in the country," said Finance Minister P Chidambaram, present at the MoU signing ceremony.

He said while the global average of premium as a per centage of GDP was 4.55 per cent, it was a dismal 2.53 in India. More over, the premium per capita was $15.7 "� much below the global average of $291.5.

``We should be able to break even in a period of six years and our capital base is projected at Rs 450 crore. As per the business plans for this venture, we should wipe out all our losses within 10 years,'' said M V Nair, CMD, UBI.

M Balachandran, CMD, BoI said the MoU also takes in to account the possibility of increase in the cap on FDI in Insurance. "We will accordingly re-organise our stakes in the JV,'' he added. The MoU provides for 51 per cent capital stake by BoI, 23 per cent by UBI and 26 per cent by Dai-Chi.

The Indian insurance business is projected to grow to $60 billion by 2010 from the present $10 billion. As per a study by Assocham, $20 billion life insurance business will accrue from rural and semi-urban areas, where the two banks have strong presence.