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Mumbai/Bangalore, Sept. 10

HSBC will pay a premium of Rs 125 crore to its equity contribution in the life insurance joint venture with Canara Bank and Oriental Bank of Commerce. Mr Harpal Karlcut, CEO-designate of the new company, said that the foreign insurer was paying a premium for access to the wide distribution network and the strong brand identity of Canara Bank and Oriental Bank of Commerce. HSBC Bank has only 47 branches in the country.

“While both Canara Bank and Oriental Bank of Commerce offer an extensive client base, complementary distribution networks and broad local market knowledge, HSBC brings to this partnership its considerable insurance experience, product range and proven bancassurance capabilities,” said a press release.

The new entity will have access to over to 4 crore customers and a combined distribution network of 3,600 branches throughout India. Under the terms of the agreement, HSBC would provide range management services that would include nominating senior executives of the company.

Mr M.B.N. Rao, Chairman and Managing Director, Canara Bank, said that the paid-up equity of the insurance venture would be Rs 200 crore. Canara Bank would bring in Rs 102 crore in proportion to its majority equity stake of 51 per cent.

Similarly, HSBC Insurance Holdings would bring in Rs 52 crore (26 per cent) and Oriental Bank of Commerce would contribute Rs 46 crore to the venture (23 per cent). The remaining Rs 125 crore will come in the form of share premium reserves to be entirely contributed by HSBC. The new life insurance company will thus receive an initial capital injection of Rs 325 crore.

HSBC Insurance (Asia Pacific) Holdings Ltd is the parent company of four underwriting companies, collectively known as HSBC Insurance.

“Our strategy will be to work on the bancassurance model since both our local partners have a large footprint,” Mr Karlcut said. The company will be hiring local talent for every area of the life insurance business — actuarial, finance and marketing, he added.

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