The country’s largest bank-State Bank of India (SBI) has pocketed an entry premium of over Rs 503 crore from Insurance Australian Group (IAG) for setting up a non-life insurance company with it according to sources close to the development. This is the highest entry premium paid by any foreign insurance company to an Indian partner for setting up an insurance company.
The public sector bank has been able to bargain for a high entry premium, given its nationwide presence with 14,000 branches, including 4,000 of its associates, and its strong brand identity.
Last year in October, Housing Development Finance Corporation (HDFC) earned a premium of Rs 202.5 crore for selling 26 per cent to Ergo International AG in HDFC General Insurance (formerly called HDFC Chubb General Insurance). However this amount included the entry premium and the portfolio premium as HDFC Chubb General Insurance was a 5-year-old company at the time of the stake sale.
SBI will hold 74 per cent stake in the non-life insurance company while IAG will hold the remaining 26 per cent stake (the maximum stake permitted for a foreign company under the foreign direct investment norms). The two partners signed the agreement on 24th November.
Insurance Australian Group (IAG) in its release has announced that it will be investing Rs 542 crore in the non-life insurance company. IAG will provide expertise in designing and pricing of products and risk management expertise.
State-run SBI already has a life insurance company in a joint venture with Cardiff, a unit of BNP Paribas. There are 16 non life insurance companies in the country of which 4 companies are owned by the government of India.