UCO Bank finally short-listed three foreign partners for general insurance biz

UCO bank has finally short-listed three foreign partners for its proposed general insurance business.

UCO Bank Chairman and Managing Director Mr S K Goel stated, “We have short-listed 3 foreign player for the proposed venture and awaiting RBI approval for moving in the non-life business”.

In the proposed general insurance business the bank will have the major hold of stakes of 30 per cent whereas the foreign partners will have 26 per cent stake as per the present regulatory structure, he stated. The remaining shares will be taken by 2-3 domestic partners including public sector or private sector banks.

He further added that 7 domestic companies have shown interest to become partners in the venture. UCO Bank will be responsible for promoting and distribution in the business, while foreign and private partners will be responsible for the domain expertise.

Mr Goel said, “as soon as we get RBI approval we will sign Shareholders' Agreement and apply to IRDA for license.” Regarding investment required, Mr Goel said, the paid-up capital of the venture would be about Rs 150 crore. The bank will be investing around Rs 45 crore for the promotion of the proposed general insurance company.

Indian Banks venturing into non-life insurance biz

Most of the Indian banks in collaboration with foreign players are planning to make venture in the non-life insurance business. The public sector banks UCO Bank, Union Bank of India and Corporation Bank have announced their plans of setting up non-life insurance companies. According to industry consultants at present this is a trend among the state-controlled as well as private banks to expand their business in this area.

SK Goel, Chairman and Managing Director, UCO Bank stated, “We will hold a 26 per cent stake in a consortium of five players. Six foreign players and four to five domestic banks have evinced an interest in tying up with us. By month end we will finalize the domestic partners and next month call for bidding from the foreign players.”

As per the information given by the sources close to the development, besides other companies Travelers of United States, Liberty Mutual of Boston (which ranks 86th in the Fortune 500 titans list in the US), Berkshire Hathaway (the holding company of legendary investor Warren Buffet), Royal Bank of Scotland and Credit Agricole, might be invited for the bid.

In this business banks are aided by prospects of high valuation whereas the investment is relatively low.

“The order of capital is not as substantial as required in a life insurance business,” informed an industry analyst. He told that ICICI Lombard required only Rs. 300 crore over an eight-year period, while ICICI Prudential Life required Rs. 5,000 crore.

Private sector ICICI Bank, HDFC and Karnataka bank are already ventured in non-life insurance biz, as do public sector State Bank of India and Allahabad Bank.