UCO Bank, Union Bank of India and Corporation Bank have announced plans to set up non-life insurance companies in what industry consultants believe is a trend in which more state-controlled as well as private banks are expected to diversify into this area.
SK Goel, Chairman and Managing Director, UCO Bank said, “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 finalise the domestic partners and next month call for bidding from the foreign players.”
According to sources close to the development, 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 are among those who may be invited to bid.
Banks are aided by prospects of high valuation while the capital required is relativelylow.
“The order of capital is not as substantial as required in a life insurance business,” said an industry analyst, pointing out 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 already have stakes in non-life insurance firms, as do public sector State Bank of India and Allahabad Bank.