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Life insurance sector needs more money

Life insurance sector needs more money
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First Published: Thu, May 14 2009. 11 05 PM IST
Updated: Thu, May 14 2009. 11 05 PM IST
Mumbai: As of December, the Indian insurance sector had infused nearly Rs16,500 crore in capital, according to data from the Life Insurance Council.
Some experts have extrapolated from this fact that given 6% industry growth over the last quarter of the fiscal year ended 31 March, an additional Rs986 crore was infused between January and April. The experts declined to be named.
So if, as consultancy firm Ernst and Young has suggested, the industry is to grow 15% in the current fiscal year, insurers must pump in close to Rs2,600 crore over the year. But most of them do not seem too keen on channelling any more capital into their businesses, given the economic slowdown. Some have even announced a freeze on expansion.
India’s Insurance Regulatory and Development Authority has also reduced the solvency margin requirement for products across the board. Solvency margin is the portion of premium an insurer keeps aside to ensure easy access to funds to service claims. Experts said with this reduction in solvency margin, capital infusion will also go down.
People familiar with the development said that Reliance Life Insurance Co. Ltd and Birla Sun Life Insurance Co. Ltd plan to infuse about Rs500 crore each into their businesses. They also said HDFC Standard Life Insurance Co. Ltd plans to infuse around Rs350 crore. However, SBI Life Insurance Co. Ltd, Bajaj Allianz Life Insurance Co. Ltd and Kotak Mahindra Old Mutual Life Insurance Ltd have not planned any capital infusion for the year, they said, requesting anonymity.
cnbctv18@livemint.com
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First Published: Thu, May 14 2009. 11 05 PM IST