Three-way Canbank life insurance venture to start by year-end

The life insurance venture floated jointly by Canara Bank, HSBC Insurance (Asia-Pacific) Holdings and Oriental Bank of Commerce (OBC) will launch its operations by the year-end. The new venture has a total capital of Rs 325 crore.

According to a Canara Bank press release, Canara Bank will hold 51 per cent stake in the new company, HSBC 26 per cent and Oriental Bank of Commerce the remaining 23 per cent.

The release further stated HSBC would contribute the majority Rs 177 crore (about $43.6 million), a premium the overseas bank is shelling out because of its smaller customer base and distribution network, compared with the other two partners.

While Canara Bank is investing Rs 102 crore (about $25.1 million), Oriental Bank of Commerce will chip in with Rs 46 crore (about $11.3 million).

According to sources in HSBC, the new insurance venture will be managed by a chief executive officer from HSBC. While the number of directors on the board will be decided based on a pro-rata basis.

HSBC brings in a considerable expertise in managing a life insurance business. It has been very successful in bancassurance products across Asia Pacific and the UK markets.

M B N Rao, chairman and managing director, Canara Bank, said, "Canara Bank, with its wide network of branches and vast clientele base, is in a strong position to improve the insurance penetration in the country, which is as low as 4.8 per cent of the country's gross domestic product (GDP). We will introduce a variety of insurance products/services, fulfilling the needs of the entire spectrum of people including high networth individuals, professionals, SMEs, farmers and also micro insurance services for the rural/semi-urban masses."

Under the terms of the agreement, HSBC will provide a range of management services, which will include nominating executives for certain senior roles.

The new company will have access to over 40 million customers and a nationwide distribution network of 3,600 branches across the country.

While both Canara and Oriental offer an extensive client base, complementary distribution networks and broad local market knowledge, HSBC brings to this partnership its insurance experience, product range and proven bancassurance capabilities.