Bangalore: HSBC Holdings signed an agreement Monday to form an insurance venture with two state-owned Indian banks, gaining access to more than 40 million customers in an expanding market.
The global bank will hold 26% in the venture — the maximum allowed to overseas insurance partners. Bangalore-based Canara Bank will take a 51% stake, leaving the rest to Oriental Bank of Commerce.
“The prospects for India’s insurance sector are good on the back of expected buoyant economic growth and rising levels of wealth in society,” HSBC group chairman Stephen Green said in a statement after the signing of the agreement.
The new company, Canara HSBC Oriental Bank of Commerce Life Insurance Company, will be capitalised at Rs3.25 billion (Rs325 crore, $80 million), of which HSBC will contribute Rs1.77 billion.
Canara Bank will contribute Rs1.02 billion and New Delhi-based Oriental Bank of Commerce Rs460 million.
The venture will have access to more than 40 million customers and a nationwide sales network of 3,600 branches throughout India.
“The new insurance company aims to fulfil the needs of high net worth individuals, professionals, small and medium enterprises, farmers and also rural and semi-urban masses,” Canara chairman M.B.N. Rao said.
Private insurance ventures, allowed to compete with state-owned Life Insurance Corporation and non-life companies beginning 2000, are trying to tap expanding demand for insurance in an economy growing 9% a year.
The demand, which has seen annual premiums double to more than $20 billion since 2000, is being driven by the absence of a social security system and low penetration dating back to the decades when government-owned insurers enjoyed a monopoly.
“Low life insurance penetration rates, a growing need for social and old age security, strong GDP growth and expected rise in savings rates mean that the proposed new company is bound to reap the benefits,” Oriental Bank chairman Alok Mishra said.