The Telegraph
Since 1st March, 1999
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Party time for private insurers

New Delhi, Aug. 23: Private insurers were agog over the prospect of entering the lucrative pension fund business which was raised today with the cabinet clearing the formation of an interim pension fund regulator and a new contributory pension fund scheme for government employees recruited after October 2002.

Private insurers — almost all of whom have foreign partners with considerable worldwide experience in managing pension funds — have been eager to manage the lucrative corpus in India ever since the government started talking of opening up the pension sector.

Most insurers said the three investment options given by the government were “safe and sound”.

“I think the options given by the government are all well constructed and will give the investor sufficient choice,” said Shikha Sharma, managing director of ICICI Prudential Life Insurance Company.

She said ICICI Prudential was keen to enter the pension market as its joint venture partner Prudential already has a substantial presence in the pensions market in developed countries such as the UK and the US.

While adding that pensioners in the overseas market are given the benefit of changing their pension plans depending on their needs, Sharma said, “I am sure the PFRDA (Pension Fund Regulatory and Development Authority) should do the same in order to give the investor the freedom to exercise his investment options depending on his risk-return profile.”

R.Krishnamurthy, CEO of SBI Life Insurance, said “The options at the outset are sound enough for Indian investors. Though option A looks like a very safe investment, option B is less safe from the view-point of a safety conscious investor. Option C will see takers from the younger generation who can afford to take a little risk”.

Under Option A, SBI Life is already selling both pension-linked insurance policies and pure pension policies without protection providing retirement and saving benefits. Asked whether he would prefer to enter the pension markets as a separate entity, he said, “Why should I go in for a separate licence for pension operations when I’m already selling it in a good way'”

Cardif SA, the JV partner of SBI Life, claims to have a huge presence in the pension markets in Poland and Latin American countries.

Nani Javeri, chief executive officer of Birla SunLife Insurance said, “The options provided for parking pension funds are very much in line with the international market and also similar to the pattern of unit linked policies.”

“We are definitely interested in entering pensions market. Sun Life is one the biggest pension providers in Canada and also have big annuity business in the US," Javeri added.

Most insurers could not determine what would be the rate of return as per the three investment options given by the government. However, all of them feel that return on investments will largely depend on the ability and prudence of pension fund managers to park pension funds and the volatility of the markets.

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