Life insurers queuing up to expand capital base

With almost half of the annual business coming in the last quarter of the fiscal, life insurance companies are increasing their share capital base in preparation of the explosive growth.

ICICI Prudential Life Insurance Company yesterday increased the share capital by an additional Rs 100 crore to Rs 625 crore in its eighth round of capital infusion.

Allianz Bajaj Life Insurance Company has also hiked equity capital by Rs 50 crore to Rs 250 crore.

Other insurance companies including Tata AIG Life, Birla Sun Life and HDFC Standard Life among others are understood to shortly announce further increase in their respective share capital.

Almost 50 per cent of business is accrued in the last quarter as reflected in last year's performance, ICICI Prudential Life CEO Shikha Sharma told Business Standard.

ICICI Prudential Life with an authorised capital of Rs 1,200 crore continues to have the highest capital base amongst all life insurers.

The hike in capital are in line with worldwide life insurance sector norms, where companies typically require frequent capital inflows in the first five to seven years to meet the capital adequacy norms as they write new business.

However, with current foreign direct investment restricted at 26 per cent, additional infusion of capital is putting a strain on domestic partners, which need to shell out 74 per cent of the capital requirement.

Over 90 per cent of premium collection goes towards maintaining reserves for every policy written. Today ICICI Prudential Life's reserves amount to Rs 931.4 crore, and will rise further as business grows.

Following the Rs 100 crore capital infusion, ICICI Prudential Life's total available solvency margin has risen to Rs 172 crore against the current required solvency margin of Rs 68 crore.

This said Sharma, is temporary and will reduce to the required solvency margin level with increase in new business.

Sam Ghosh, country manager and CEO designate of Allianz Bajaj Life Insurance said: "Infusion of share capital is aimed to fuel our aggressive growth plans in the near future."

Tata AIG Life recently increased its share capital and will infuse additional capital shortly, said its managing director Ian Watts.

ING Vysya Life Insurance Company managing director & CEO Yvo Metzelaar said that there is an increased stain among local partners as writing new business calls for enhancing equity capital.