Qbe Takes A Stake In Indian Insurance
The Age
Saturday July 21, 2007
GLOBAL insurer QBE has gained its first foothold in the potentially lucrative Indian insurance market, which could eventually provide the group with its largest operating region outside of the US.
The Sydney-based company has signed a deal with one of India's leading diversified conglomerates to establish a joint venture general insurance business to challenge the dominance of the state-owned Life Insurance Corporation (LIC). QBE joins several international rivals among 20 private companies granted licences to operate in India, which opened its insurance market to competition in 1999. The Government had previously held a monopoly on providing insurance to India's 1 billion citizens. In further reforms, the Government recently increased the amount of equity international companies can hold in local insurers from 26 per cent to 50 per cent, sparking a renewed burst of foreign investment. The changes prompted QBE to make its move as the insurer had more say and control over the activities of the new company to be set up with its partner, the Rahan Raheja Group. The investment of little more than $7 million for an initial shareholding of just over 25 per cent is tiny by QBE's standards; it is dwarfed by QBE's combined $US2 billion purchases of Winterthur and Praetorian in the last six months, cementing the group's move into North America. In the longer-term, the prospects for growth in India are immense, according to the international analysis company Research & Markets.The country already has the largest number of life insurance policies in force, and the market is growing at an annualised rate of between 15 and 20 per cent. Two years ago, the Indian market was estimated to be worth 450 billion rupees ($A10 billion). Nonetheless, only 20 per cent of the population has insurance cover, well below the ratio elsewhere. "These facts indicate the immense growth potential of the insurance sector," R&M said in a recent report on the Indian market. And while the government-owned insurer LIC still retains a market share of about 70 per cent, its hold over consumers has loosened considerably in the last two years since the introduction of competition. QBE expects its new venture to start writing premiums early next year. It will provide the company's managing director and its front and back office systems, while Rajan Raheja will nominate the chairman and assist in product distribution. Frank O'Halloran, QBE's chief executive, who signed the deal in Mumbai, said: "We are excited about the great opportunity offered by India's large and rapidly growing general insurance market." QBE shares closed 12? higher at $30.84 yesterday.
© 2007 The Age
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