Industrial Development Bank of India, Federal Bank and Fortis have signed a memorandum of understanding on the formation of a life insurance company in India.
IDBI and Fortis announced in March this year that they were jointly seeking a third partner to pursue life insurance business in India. IDBI and Fortis have since identified Federal Bank as their third partner. The intention is to establish a life insurance company, of which IDBI will initially own 48%, Federal Bank 26% and Fortis 26%.
“We are very glad to enter into a joint venture with IDBI and Fortis to start a life insurance company,” says Sri. M. Venugopalan, Chairman of Federal Bank. “Federal Bank with a spread and reach to every nook and corner of Kerala state and to all major urban/metro centers of the country has a wide distribution network and a vast customer base. Our aim is to convert ourselves into a financial super market with an array of financial products on our shelves for our customers to choose from, in addition to our present banking products and services. The new joint venture will enable us to offer a wide range of insurance products to our customer base and to extend our customer base. The synergy between IDBI Bank and Federal Bank, the two Indian Banks and Fortis with its vast expertise in the insurance business is expected to enrich the Indian insurance market.”
Shri V.P. Shetty, Chairman and Managing Director of IDBI, says IDBI reckons life assurance complements its existing range of financial products and services. “Federal Bank and Fortis have been carefully chosen as partners in the venture to create a successful insurance business,” he says. “Federal Bank, one of the successful private sector banks having a good retail distribution reach and loyal customer base in India and abroad, will be ideally suited to complement IDBI’s growing distribution network. The Indian partners have successfully pursued distribution of insurance products through the bank assurance model and would be able to impart significant value additions into development of market friendly products by the new company. Fortis, one of the largest players in the insurance business in Europe and also having successful joint ventures in different Asian countries, will bring to the joint venture its unique experience in developing and operating the bank assurance model, which will augment the activities of IDBI and Federal Bank. The signing of this MoU is a significant step towards commencement of life insurance business. The partners will jointly approach the regulators for obtaining the necessary statutory and regulatory approvals and will also develop an effective business model to provide a wide range of products in the Indian Insurance market.”
Peer van Harten, CEO of Fortis Insurance International, says the transaction is in line with the expansion strategy of the bank. “This is a unique opportunity for Fortis to start insurance operations in India, which is rapidly becoming one of the largest insurance markets in the world,” he says. “We are very happy to team up with Federal Bank in the partnership we have created with IDBI. Both the network and market expertise of Federal Bank will ideally complement IDBI and Fortis’s respective distribution channels, skills and experience. We are looking forward to starting operations and to establish this multi-channel distribution life insurance company, whereby all parties involved contribute their specific skills.”