The lure of India’s rapidly growing life
insurance industry has attracted another foreign entrant, ERGO
Insurance Group, the 91.7 percent owned primary insurance unit of
German reinsurer Munich Re. A joint venture (JV) with Indian
conglomerate Hero Group, ERGO will have a 26 percent stake in the
company to be named HERO ERGO Life Insurance (HELI).

A fairly lengthy process of complying with the requirements of
India’s Insurance Regulatory and Development Authority (IRDA) lies
ahead and the new insurer is anticipated to begin operations in the
second quarter of 2009. HELI’s CEO, Mukul Gupta, formerly held
executive positions with Indian financial services companies
including Birla Sun Life Asset Management and Bajaj Allianz Life
Insurance. HELI’s initial capital will be INR200 crore ($94
million) contributed equally by ERGO and Hero Group.

The tie up with HERO Group follows ERGO’s establishment of a
representative office in India in May 2007 with the objective of
seeking JV partners and fostering relations with the IRDA. Hero
Group, which comprises 20 business units including the world’s
largest motorcycle manufacturer, reported a turnover of $4.2
billion in 2007. ERGO noted that HERO Group uses well-trained and
widespread sales teams and customer touch-points to sell their
products, resources that should prove valuable in HELI’s
distribution strategy.

ERGO, which has set its sights on HELI becoming one of India’s top
five life insurers within 10 years, noted that premium income
generated by India’s life insurance industry grew by 63 percent in
2006 and 47 percent in 2007, reaching $40 billion in the latter
year. ERGO added that projections indicate that premium income will
grow to between $80 billion and $100 billion by 2012.

The establishment of HELI will complete ERGO’s establishment of a
complete range of insurance operations in India. ERGO’s first foray
into India came in October 2006 with the formation of a health
insurance company, Apollo DKV Insurance in a JV with Indian private
hospital operator Apollo and Apollo’s associates.

This was followed in October 2007 with the announcement that ERGO
was to acquire a 26 percent stake in HDFC General Insurance, a unit
of Indian residential mortgage lender the Housing Development
Finance Corporation.

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