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World Bank's IFC keeps insurance foray plan alive

L Prashanth in New Delhi

Notwithstanding the 26 per cent cap set for foreign private equity in insurance sector, the International Finance Corporation, a member of the World Bank group, has kept open its plan to invest in the insurance business in India, a top IFC official said.

''We are ready to help in any way if there is any role for us in the insurance business,'' said Usha Rao Monari, regional manager, new investments.

The IFC is talking to a number of Indian and foreign companies and will ''invest as soon as something viable and concrete comes up,'' she added.

Asked how will a finance company like the IFC squeeze itself into the 26 per cent upper limit on foreign equity, Monari said, ''The very presence of the IFC in the joint venture will provide comfort to the foreign partner thereby catalysing the project.''

Many foreign insurance companies who would also bring in the latest technology are keen to give the IFC equity participation, she asserted.

Earlier last month, Rashad Kaldany, IFC's director, south and southeast Asia department, had said that the IFC is likely to tie up with a maximum of three for life insurance and one or two companies for non-life business.

However, plans of the private funding arm of the World Bank will hinge on the investment cap finally decided by the government for foreign financial institutions. ''If the current proposed limit of 26 per cent for foreign investors is retained, it is difficult for the IFC to pick up equity in insurance companies,'' he had said.

The multilateral agency which usually picks upto a maximum of 25 per cent in a private company, would seek equity participation of between ten per cent to 20 per cent in the Indian insurance companies. ''We would invest to the extent that IFC has a nominee on the board to protect our interests in the company,'' Kaldany had added.

Now, Monari has asserted that Kaldany's statement was not IFC's policy statement and said the multilateral agency's planned insurance foray remains in tact.

Citing the confidentiality clause, Monari declined to describe the state of negotiations and refused to clarify how much of IFC's estimated $ 150 million investments set out for 1999-2000 would be earmarked for the insurance sector.

Monari said no time-frame has been set for investing in the insurance sector even though the indications are that the IRA Bill is likely to be passed by March 2000. ''We are working as fast as possible.''

The planned investments in insurance sector, Kaldany had said, would form part of the IFC strategy for India to exploit synergies among private infrastructure development and financial markets.

The multilateral agency, he had said, would also focus on additional financial markets like contractual savings, housing finance, distressed asset resolution and strengthening of banks and non-banking financial institutions.

On the increased emphasis towards the life insurance business, the IFC official had said it would help development of infrastructure investment.

It is estimated that rapid growth in insurance and the liberalisation of investment norms for pension funds could generate $ 20 billion over the next ten years, supplying 40 per cent of the funds required to boost the nation's infrastructure.

IFC has been emphasising projects supporting private entry into such areas as infrastructure, banking, contractual savings and the mutual fund industry.

After a lull in FY 1998 in the company's investments which had stooped to $ 54 million on account of nuclear-related sanctions, financing of private companies had surged to $ 72 million in FY 99. The agency invested in three companies -- Sarshatali Coal Mines, Carraro India Limited and Moser Baer India Limited -- in FY 1999.

UNI

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