insurance updates 20 27 april 2011

8/4/2019 Insurance Updates 20 27 April 2011

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DAILY INSURANCE UPDATE

20-27 April 2011

Industry

IRDA relax accounting norms for insurers

No truck with insurers

Accounting norms for insurers relaxed

Cost confusion for the insured

Irda will continue to regulate pension schemes ofinsurance cos

Irda to look into cost of regulation

Life Insurance

Max New York Life launches igenius scholarship2nd edition

Future Generali launches ULIP Wealth Project

Canara HSBC OBC Life clocks 82% growth in FY11premium income

Children plan in life insurance business posts fastgrowth

Max New York Life may break-even this year

Markets need to readjust for earnings growthdowngrades: Sampath Reddy, CIO, Bajaj AllianzLife Insu

Protect dependents from financial liability throughterm insurance

Pvt life insurers' first year premium down 4 pc inFY11

Post-Sept norms hit life insurance biz

General Insurance

Magma''s insurance arm to commence operationsin current fiscal

Health Insurance

Add extra cover to your office mediclaim

Why critical illness cover is so crucial for everyone

Pensions/PF

Pension Products may Come with CapitalGuarantee

Employer can't demand PF interest on termination

The nuances between liquid and ultra short-termbond funds

'India's FII share likely to drop this year': AnandShah, CIO, BNP Paribas Mutual Fund

MF investor awareness programme gainingmomentum

Invest in short-term income funds

Cost of managing a portfolio

When a fund house merges schemes

'Inflation can eat into the India growth story':Arun Khurana, UTI Mutual Fund

Smaller fund houses deliver higher returns

Pvt. Equity & Hedge Funds

PE investments, mergers & acquisitions at $ 29bn in Jan-Mar

Economy & Finance

Rupee drops 3 paise against dollar

Sensex gains 31 points in volatile trade

Kaushik Basu expects inflation to fall below 8%10% growth not achievable: Plan panel to tellPM

Exports rise 37.5% to a record high of $246bn

FDI dips about 25% in first 11 months of 2010-11

Good farm output will help ease inflation to 6 %:Rangarajan

10% GDP growth not feasible: Montek

Closing

Last Finacial Closing
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PF fund managers may get higher fee

PFRDA chief rules out turf war with Irda

SEBI

SEBI raises sovereign wealth funds investmentceiling to 20%

Acting in concert wont apply to SWFs

SEBI to set up forensic accounting cell soon

Emerging markets back on FII radar

Sebi to have own forensic lab to check frauds

Sebi board to reconsider NSDL case

Mutual Funds& AMCs

Industry

IRDA relax accounting norms for insurersPTISee this story in:The Hindu Business Line , The Times of India, The Economic Times

New Delhi: Insurance regulator, IRDA, on Tuesday relaxed accounting norms for insurance companies to takecare of higher liability arising out of enhanced outgo towards gratuity for their employees.

The regulator allowed the insurance and reinsurance companies to amortise (pay off in regular intervals) theadditional liability on account of gratuity over a period of five years starting from financial year 201011.

Last year the government had enhanced gratuity limit for all employees to Rs 10 lakh from Rs 3.5 lakh andalso revised payment structure of employees of Public sector entities.

The insurance regulator said these moves would lead to the increase in liability on account of gratuity which

would in turn affect insurers profitability.

(This) in turn will impact the insurers profitability significantly as they need to provide the same in the financialyear 201011. This will cause a strain on their solvency as well as on their performance results, IRDA said.http://www.thehindubusinessline.com/industry-and-economy/banking/article1709739.ecehttp://timesofindia.indiatimes.com/business/india-business/Insurers-can-pay-gratuity-in-instalments/articleshow/8031971.cmshttp://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/insurers-can-pay-gratuity-in-instalments/articleshow/8033467.cms

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No truck with insurersThe Financial Express

A 70% hike in any price is bound to get anyone upset, so it is not surprising that various transporterassociations have reacted the way they have to the Insurance Regulatory and Development Authoritys (Irda)decision to revise the premium on mandatory third-party insurance liability cover by 65-70%. Variousassociations which are meeting today are threatening to go on strike if the hike is not withdrawn. Whether Irdablinks will probably depend on how the political class tackles the threat, which will be aggravated by the factthat a transport strike will certainly result in prices of essential goods rising.
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The truckers, however, would do well to keep in mind that, even after the Irda hike, they are still being hugelysubsidised by the state-owned insurance companies. The third-party claims ratio for commercial goodscarrying vehicles went up from 153% in 2007-08 to 173% in 2009-10that means for every R100 theinsurance industry earned by way of premium, it paid out R173 towards the third party claim, by dipping intoprofits it made in other segments. Since the claims ratio is a lower 72% for private insurers compared to 232%for the public sector ones, only the private insurers will be in the black after the hike.

Which raises two questions: why does the Irda have to fix these tariffs when it has freed up all others and, two,why dont the PSU insurers just leave this business to the private sector firms? The reason why Irda has tonotify tariffs is that third-party insurance is mandatory and, if the prices are left to market forces, they will rise tocover the claims lossesthat is, they will rise by around 2.5 times. Indeed, the reason why private firms havelower claims on commercial vehicles as compared to PSU insurers is that private firms are very choosy andinsure only the best transporters. If the government wants rates to remain low while not bleeding the PSUinsurance firms, it will also have to chip in and do its bit. That means ensuring drivers dont get away withgetting licences without being skilled, that transporters stick to the maximum number of driving hours, thatoverloading not be allowedat the end of the day, this is what makes accidents rise and third-party claimsballoon.http://www.financialexpress.com/news/fe-editorial-no-truck-with-insurers/778347/0

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Accounting norms for insurers relaxedThe Financial Express

Mumbai: Insurance regulator Irda on Tuesday relaxed accounting norms for insurance companies to take careof higher liability arising out of enhanced outgo towards gratuity for their employees.The regulator allowed the insurance and reinsurance companies to amortise (pay off in regular intervals) theadditional liability on account of gratuity over a period of five years starting from financial year 2010-11.

Last year the government had enhanced gratuity limit for all employees to R10 lakh from from R3.5 lakh andalso revised payment structure of employees of public sector entities.

The insurance regulator said these moves would lead to the increase in liability on account of gratuity which

would in turn affect insurers profitability.

(This) in turn will impact the insurers profitability significantly as they need to provide the same in the financialyear 2010-11. This will cause a strain on their solvency as well as on their performance results, Irda said.http://www.financialexpress.com/news/accounting-norms-for-insurers-relaxed/778531/

Cost confusion for the insuredDipta Joshi & Neha Pandey / Mumbai April 21, 2011, 0:17 IST

Mortality rates can change for the same age, because of the difference in features.

Buyers of insurance products always get confused with charges. There is a premium allocation charge, policyadministration charge, mortality rate and so on. The confusion gets worse when these rates keep on changingannually.

Take for instance, Mumbai-resident HS Pathaks confusion. He is wondering why two different children plansfrom the same insurance company have a premium difference of Rs 40,000: one Rs 36,000 and another Rs76,000.

While it can be mainly due to the difference in product features, things get more confusing when one looks atthe mortality rate. The mortality charges for a 35-year old man buying Bajaj Allianz Life Insurances MaxAdvantage Plan (NAV Guaranteed) are Rs 3.03 per Rs 1,000 sum at risk. For its Smart Insurance Plan(endowment plan), he pays Rs 2.03. The NAV guarantee plan charges a higher rate due to an in-built
http://www.financialexpress.com/news/fe-editorial-no-truck-with-insurers/778347/0http://www.financialexpress.com/news/accounting-norms-for-insurers-relaxed/778531/http://www.financialexpress.com/news/fe-editorial-no-truck-with-insurers/778347/0http://www.financialexpress.com/news/accounting-norms-for-insurers-relaxed/778531/


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accidental death benefit.

The mortality charge is the cost levied towards providing death benefit to the policyholders. Since thesecharges are linked to the average Indian life expectancy ratio (which is about 67 years), one would expect it tobe similar across all age groups, products and companies.

A senior official from the Insurance Regulatory and Development Authority (Irda) says mortality rates dependon the age of the policyholder, gender (premium for women is 15-20 per cent less than men), financial status,geography and occupation (a diver will be charged more than a teacher). Mortality is dependent on the sum atrisk (sum assured minus fund value) and should reduce as the fund value increases in the policy term, headds.

While working out mortality rates, insurance companies use the Indian Assured Life Mortality (IALM) Table1994-96 as a reference besides their own claims-related experiences. However, the number of claimsindustry-wide may be different from the ones seen by the company, giving way to higher premiums manytimes. Therefore, they base the rate on their assumption as well, said the Irda official.

Rituraj Bhattacharya, head, product development, Bajaj Allianz Life Insurance, says, Mortality charges, evenwithin the same class of products, could vary due to variation in the factors that determine it. These are thecompanys mortality assumptions, underwriting guidelines and claim experience, the product distributionchannel, etc.

Yes, even the distribution channel can ascertain your mortality fee. Brokers can be bad for customersbecause they do not pay attention to underwriting, thus, increasing the cost. A company agent does properunderwriting and increases premiums if required, said the Irda official.

Higher mortality rates are charged when companies offer extra benefits for a product but dont levy extracharges. Childrens plans that waive the premium in case of the death of the parent are also a case in point.For products with in-built waivers, the waiver is not charged as a rider, but the mortality rate, in such cases, isloaded, say insurance officials.

According to Paresh Parasnis, executive director and COO of HDFC Life Insurance, the charge is only up tothe extent of the extra costs the company needs to incur. He says, As there is a protection element besidesthe savings element in such schemes, the policyholder is charged mortality only till the time the savings crossthe sum assured.

According to insurance companies, the mortality charges will depend on the socio-economic class the productis targeting. So, typically, products designed for HNI customers will be charged less mortality since they arelikely to have a better lifestyle, says Sanchit Maini, chief actuary, Max New York Life.

It is likely the premium charged for a product could differ based on the distribution channel. This is largely truefor products sold directly by the company or through an online platform. When a product is sold online, nocommission is payable and this benefit is passed on to the customer.

Last September, Irda came up with a new set of guidelines for Ulip products. While it capped the skyrocketingfront-end charges like the premium allocation and policy administration costs, mortality charges were left out ofthe ambit. And insurance agents claim some insurers have cashed in on this opportunity.

A couple of insurers have increased mortality rates on account of a few benefits, like a higher payout foraccidents, said the insurance agent. Bajaj Allianz Life Insurance, Reliance Life Insurance, Aviva LifeInsurance and Metlife have increased mortality rates by 10-20 per cent.

Insurance companies, however, deny this. Companies are aware any irrational loading will ultimately affectthe yields of Ulip products, besides getting them pulled up by Irda, says Parasnis.http://www.businessstandard.com/india/news/cost-confusion-forinsured/432989/

Irda will continue to regulate pension schemes of insurance cosThe Hindu Business LineSee similar story in:The Hindu(Apr 24)

Hyderabad: The pension schemes of insurance companies will continue to be regulated by the insurance


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The process may take a while to be completed, said the chief executive of a life insurance company who didnot want to be named.

Irda will have to go to each insurance company and find out what has been the impact. It will be different foreach company, he said. It remains to be seen if they will be committed enough to carry out this large logisticexercise.

Irda is looking at better and not just more regulation, Narayan said, responding to industry concerns that firmshave had to cope with many changes within a short span of time.http://www.livemint.com/2011/04/24234239/Irda-to-look-into-cost-of-regu.html?h=B

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Life Insurance

Max New York Life launches igenius scholarship 2nd editionPTISee this story in:The Hindu Business Line

Mumbai: Max New York Life Insurance today announced its second edition of igenius scholarship, a uniqueparent-child engagement initiative to support all-round child development.

igenius is an innovative engagement programme to understand and support the needs of a young Indian lifeinsurance consumer and our journey in the first year has been overwhelming. We are pleased to reiterate ourcommitment to sustained all-round child development and launch igenius 2011, the Max New York LifeInsurance Director & Chief Marketing Officer, Ms Anisha Motwani, said.

The igenius scholarship programme involves a robust multiple-level evaluation process that has beenconceptualised in association with Derek OBrien. Children from the third to the eighth standards canparticipate in this programme and win more than 1,000 prizes worth Rs 1 crore.

igenius is aimed to become even bigger and is expected to generate greater participation. The programme willbe extended to underprivileged children, she said.

The registration will begin on April 28 this year and the grand finale will be held in December here. The igeniusscholarship had attracted more than 10-lakh participants across 1,000 cities last year.

The core philosophy of life insurance is protection for the uncertain and unseen future. The future of childrengets most impacted in case of any eventuality. This year igenius makes a small beginning towards socialinclusion by supporting some of such less fortunate children who do not have family support to promote their

all round development, Ms Motwani said.

Max New York Life Insurance is a joint venture between Max India and the international arm of New York Life.http://www.thehindubusinessline.com/industry-and-economy/banking/article1709494.ece

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Future Generali launches ULIP Wealth ProjectThe Economic Times

Future Generali has launched a unit-linked plan (Ulip) called Wealth Protect. The Ulip offers protection of 7 to30 times your annual premium, depending on the investor's age, term of the policy and the choice of theinvestor. On the investment side, it offers six investment options which target investors of different risk

appetites.

LOYALTY ADDITION:The guaranteed loyalty addition is 5% of the first year annualised premium if the premium amount is below .25,000 and 7.5% for the premium amount above . 25,000. On maturity , the insurer pays the fund value plusguaranteed loyalty addition . For example, you will get a guaranteed addition of . 1,250 over and above thefund value at maturity for a premium payment of . 25,000 for 10 years.

FUND OPTIONS:An investor should ideally opt for Future Apex Fund or Future Opportunity Fund. The apex fund allows theinvestor to invest up to 50% in debt. The equity exposure of the portfolio falls in the range of 50% to amaximum of 100%. The Opportunities fund offers 20:80 debt to equity ratio for an investor. The logic is the coststructure of the product is steep. Hence, an aggressive fund, which has a higher exposure in equity, has theability to deliver returns after accounting for the charges. Under the future secure option, the Ulip invests inlow-risk instruments such as bank deposits, certificate of deposits etc. "This fund is advisable for short-term

investors since interest rates are expected to rise further. The investor could shift to another fund option oncethe interest rates taper out," says GN Agarwal, the chief actuary and chief risk officer of Future Generali.Historically , such products have offered a return of 5-6 %. A premium of . 25,000 for future secure fundattracts charges such as premium allocation at 5% (for the first year), fund management at 1.10% and policyadministration at 3.75% among other charges. These charges alone add up to 9.85%. Even after the sixthyear, the costs add up to 5.95% of the premium.

WHY YOU CAN GO FOR IT:Future Apex Fund and Future Opportunity fund are aggressive equityoriented investments which can deliverpromising returns.

WHY YOU CAN AVOID IT:The cost structure is steep just like other Ulips. You have cheaper investment options in other equityinvestments , which can be supplemented with a simple term cover.Copyright 2011, Bennett, Coleman & Co. Ltd. All Rights Reserved"

http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/future-generali-launches-ulip-wealth-project/articleshow/8033454.cms

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Canara HSBC OBC Life clocks 82% growth in FY11 premium incomePTISee this story in:The Economic Times

New Delhi: Canara HSBC Oriental Bank of Commerce Life Insurance today reported a 82 per cent growth in

gross written premium at Rs 1,532 crore.

During March, the company garner a premium income of Rs 256 crore, which helped it position amongst thetop 10 private players in terms of weighted new business premium income, Canara HSBC OBC Life said in astatement.

The company issued over 1.11 lakh policies in the fiscal. "The company's consistent growth is a result of theefficient bancassurance model of distribution, high quality sales..," Canara HSBC OBC Life Insurance CEOJohn Holden said.
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In the current fiscal, the company will continue to focus on expanding its product portfolio to support thecustomers of distributor banks.

The life insurer is a joint venture between Canara Bank, Oriental Bank of Commerce and HSBC Insurance(Asia-Pacific) Holdings Ltd.

Currently, the company distributes its products through the branches of partner banks. "The company'sachievements testify the strength of the bancassurance model in efficiently reaching both urban and ruralcustomers along with the corporate segment of the distributing banks," the statement added.http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/canara-hsbc-obc-life-clocks-82-growth-in-fy11-premium-income/articleshow/8027160.cms

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Children plan in life insurance business posts fast growthVirendra Singh RawatBusiness Standard

New Delhi/ Lucknow: The children plan segment in the domestic life insurance industry is growing fast due toincreasing awareness among consumers.

Today, the segment accounts for 20-25 per cent of the life insurance space in India.

There is a growing realisation among people that education in the future would be quite expensive, so peopleare investing in children plan to ensure their quality education, private insurer Max New York Life InsuranceSenior Director and Chief Distribution Officer Ashish Vohra told Business Standard. Five years back, theproportion of children plans in life insurance industry was half of todays volume, he informed.

Vohra said the segment would continue to grow rapidly, since the education sector had also witnessed theentry of private players in a big way and it has been well accepted that quality education in the future wouldcome at a price. Commenting on the likely effects on life insurance industry due to the proposed Direct TaxCode (DTC), he said according to the disclosures made so far, there were not many incentives for thesegment. However, DTC would encourage long-term life insurance policies with minimum cover of 20 years,

he added.

Meanwhile, Vohra said the growth rate of life insurance industry was likely to dip by 15 per cent for 2010-11,due to certain regulatory issues that had cropped up. During 2009-10, the new business premium for lifeinsurance segment was about Rs 80,000 crore, which is likely to dip to under Rs 70,000 crore for 2010-11, hesaid.

He was in town to announce the companys scholarship programme igenius 2011, which kicks off tomorrow.The programme promises 1,000 scholarships worth Rs 1 crore to students, selected through multi-level pan-India evaluation process.http://www.business-standard.com/india/news/children-plan-in-life-insurance-businessposts-fast-growth/432796/

Max New York Life may break-even this yearMumbai, April 20:

With expectations to break-even this fiscal, Max New York Life (MNYL) has said that it does not see the needto infuse any further capital in the year to support its growing business.

The ten-year-old private life insurer, part of the insurance and healthcare group Max India, has a paid-upcapital of around Rs 2,000 crore (as of August 2010).

We have already reported profits in the third quarter of the previous fiscal and were one of the few insurers topost a growth in sales despite the announcement of the tighter norms on the sale of Unit-Linked InsurancePlans. We should break-even this year and do not expect to add any more capital this fiscal as our reservesare adequate, said Ms Anisha Motwani, Director and Chief Marketing Officer, MNYL.
http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/canara-hsbc-obc-life-clocks-82-growth-in-fy11-premium-income/articleshow/8027160.cms%20http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/canara-hsbc-obc-life-clocks-82-growth-in-fy11-premium-income/articleshow/8027160.cms%20http://www.business-standard.com/india/news/children-plan-in-life-insurance-businessposts-fast-growth/432796/%20http://www.business-standard.com/india/news/children-plan-in-life-insurance-businessposts-fast-growth/432796/%20http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/canara-hsbc-obc-life-clocks-82-growth-in-fy11-premium-income/articleshow/8027160.cms%20http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/canara-hsbc-obc-life-clocks-82-growth-in-fy11-premium-income/articleshow/8027160.cms%20http://www.business-standard.com/india/news/children-plan-in-life-insurance-businessposts-fast-growth/432796/%20http://www.business-standard.com/india/news/children-plan-in-life-insurance-businessposts-fast-growth/432796/%20


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Brand building

To continue brand-building, the company is also planning extensive marketing activities this year. This includesa continuation of the igenius' scholarships for talented children into the second year, besides a recentlyannounced sponsorship deal with IPL team Pune Warriors.http://www.thehindubusinessline.com/industry-and-economy/banking/article1712303.ece

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Markets need to readjust for earnings growth downgrades: Sampath Reddy, CIO, BajajAllianz Life InsuPriyank Lakhia/BloombergSee this story in: mint

Sampath Reddy, chief investment officer of equity at Bajaj Allianz Life Insurance Co. Ltd, speaks in aninterview on his expectations about the Indian stock market, fourth-quarter earnings and the sectors that hefavours. Edited excerpts:

Markets have become volatile after the surge in March. What are your expectations about the markets and theearnings season?The rally in March and late last April was pretty sharp and driven mainly by foreign flows.We need to give investors some time for valuations and the kind of valuations that we are seeing. Basically,the key driver for markets in the near term will be these quarterly earnings, which has already started comingthrough.

Markets are looking at a 17-18% growth for the full year.But in the last three-four months, earnings have been getting downgraded, so in that context, I would see themarkets stabilize here. So we need to give it some time for valuations to get re-adjusted.Markets had moved higher on the back of strong inflows in March.What is your view on fund flows?The FIIs (foreign institutional investors) have put in a large amount of money in the last year, around $24billion in the last two years and they continue to be the buyers. So that is what is driving the markets.

Now if you look at the local fund flows, like in the insurance companies, there is a severe deceleration that isseen there and in the case of mutual funds, there tends to be major withdrawals. In the last year there havebeen some 20,000 withdrawals from the mutual and equity fund flows. The previous year it was also muted. Somutual funds continue to see outflows.Domestic flows continues to be a key driver for the markets.FIIs have been the main drivers so far, but with the current valuation, I wouldn't be as optimistic as I was in thepast.You mentioned possible down grades. What are your concerns?The immediate concern would be oil, which is currently at $112 per barrel, which is very high, and this is goingto put pressure on the overall inflation and the cost structure of all the companies and bring down the earnings.I believe that the government will increase the price of petrol and diesel after the state elections gets done.

The other issue is inflation is at 8.9%, which is slightly high.So, in contrast with the market expectation and at this level of inflation, interest rates will continue to go up. Sothat would be a key risk to the overall cost of capital.

Now the overall growth, if you look at IIP (index of industrial production), which has been growing 3.5% in thelast four months, is not a healthy indicator.So if you look at the current situation, on one side you are seeing inflation on a high, and on the other, IIPgrowth isn't very exciting. So from that perspective, we need to be a little cautious about the market.

What are you advising clients to do?Overall we are certainly optimistic and bullish on the India growth story. We don't see a risk to the GDP (grossdomestic product) growth rate.
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Only thing from the flows, the current valuation if you look at it, we need to give it some time, because marketsneed to re-adjust for earnings growth downgrades, as that would take about three-six months.

Post that time correction, one can look at re-investing in the markets.

What is your view on the banking industry? Is there a case for in vestment in this sector?Banking continues to be bullish. Banking as a sector, the credit growth for the last two years has been prettygood at about 22%. If you look at the earnings they have been good so far.Which tells us that the growth is good and asset quality is improving. So banking continues to do well on theback of good growth. Valuations, specially in the PSU banks are attractive.

Information technology (IT) stocks have dropped after Infosys numbers disappointed. What's your expectationabout the sector?We are already over-weight on the IT sector as such. But Infosys results have been disappointing. Thequarterly numbers were weak. Based on the Infosys numbers that were pretty much below expectations, wewould re-look at the growth outlook for Infosys as well as the IT sector.

Mid-Cap IT companies have been disappointing for a year or so. Now the large cap companies are alsoshowing bad numbers. So the growth for IT companies should be below expectations of the market and maybethere will be downgrades from the IT sector, for the next couple of quarters. So we will re-look at the sector.

In this volatile market, is there a case to look at defensives like FMCG (fast moving consumer goods) andpharmaceuticals?I think these sectors are looking very good. We have been overweight on these defensive sectors for nearlytwo years. Specially in pharma where the growth continues to be very good in the domestic markets.

In FMCG, growth is picking up because of an increase in local consumption and rising income levels. We arepositive on these companies, as they are of a good brand franchise and give higher return on equities.

What is your view on the automobile industry?Auto has been showing good numbers for the last two years.In fact, it is the fastest growing sector in the whole manufacturing space. Auto volumes have been pretty good.That has been happening due to strong rural and personal in- comes, which is what is driving the growth forconsumer durables.

We are bullish not only on auto, but also on refrigerators and air conditioner manufacturers and otherconsumer goods in the company.

Protect dependents from financial liability through term insuranceParesh ParasnisThe Indian Express(Apr 25)

With life insurance being an integral part of an individuals financial planning exercise, a lot of focus has beengiven to life insurance products including term insurance plan. Before talking about term insurance orprotection plan, we must go back to the fundamentals of life insurance. Insurance products fall under two broadcategories pure risk cover and savings with risk cover.

Pure risk coverTerm insurance or protection plan falls under the pure risk cover category. This category of products only hasthe protection element and no maturity benefit associated with the policy. For example, the policy will only

make a payment to the policyholder in the event of the specified event (death) occurring. Term insurance plansare usually cost-effective. In fact, term insurance plans are more cost-effective, when bought online. Forexample, with a protection plan, a mere sum of Rs 2,508 annually (exclusive of service tax & educational cess)could help provide a financial cushion of up to Rs 10,00,000 in the event of death of the policyholder (examplebased on a male policyholder aged 25 years, with a 25 year term).

Term plans are insurance products in their purest form i.e. they are designed and priced so that thepolicyholders, as a group, are effectively pooling their premiums in order to pay a benefit for a random anduncertain, but significant event that may occur. This means that for each policyholder the cost of providing thecover is relatively modest in comparison to the benefit that would be provided if that event occurred.


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When to opt for a term plan?A term plan is ideally suited for individuals, who are the single bread earners of the family, possessing goodinsurable health and those with high financial liabilities. Usually, low-income, high financial liabilities,dependent spouse and children and good insurable health are all the triggers for choosing a term insurance.The younger one starts, the better, as premiums will be low, when the individual is younger and healthier. Also,when the insured is young, he/she can avail of longer term coverage.

Term plan is ideal for an individual to protect dependents from any financial liability such as a housing loan,childrens education loan etc in case of death. The ideal time to buy term insurance is when an individualcreates the loan liability. Apart from the price factor, the service, advice, brand value and claims settlementratios of a life insurer need to be taken into account while purchasing a term plan.Term coverWhile determining the right term, one must consider factors like long-term financial commitments and thepossibility of deterioration of health parameters in future. It makes sense to purchase a term cover when thesame is available for the maximum term available. Once can easily drop the cover at a later stage in case thesame is not required, without any kind of penalty.

As the name suggests, term plan is for a specific period or term. This term can range from 5 to 30 yearsdepending on the individuals preference or financial needs. The premium will stay the same for the duration ofthe term, for example, 10, 15, 20 or 30 years.

The term cover sometime carries an option for guaranteed renewal on expiry, without any health evidence.Such contracts are called renewable term contracts. Under renewable term contracts just before the expiry ofthe policy, the insured has a choice to continue with the policy by renewing the same. The premium on renewalwill be charged at the rate applicable to the attained age at the time of renewal. It simply means that thepremiums typically will go up at every renewal.There is no such thing as an ideal policy term, but generally ones cover should last till their working life assuming the liabilities have decreased and dependence of nominees on the insured has reduced.

Benefits of RidersWhile purchasing a term plan, one must be aware of optional riders available with the base policy. Ridersprovide additional value to a basic term plan, at marginal cost. Riders are not standalone products, but anadditional benefit option that can be purchased along with the basic insurance plan. The most popular ridersavailable in the market are accidental death and disability cover, critical illness cover etc.

A life insurance contract is a contract of utmost good faith, wherein it is the duty of an individual to inform theinsurer of any facts that have the capacity to increase the risk for the insurer. One must read the proposal formafter it has been completed and confirm that all answers are completed correctly and there is nomisrepresentation in the proposal form.

This is important as the claims will be payable only when utmost good faith is observed while purchasing lifeinsurance and there is no misrepresentation or false information given while answering questions in theproposal form.http://www.indianexpress.com/news/protect-dependents-from-financial-liability-through-term-insurance/780758/0

Pvt life insurers' first year premium down 4 pc in FY11PTISee this story in:The Economic Times

New Delhi: The private life insurance sector saw a decline of four per cent to Rs 30,451 crore in the first year

premium income during the 2010-11 fiscal.

As many as 10 companies, of the total 22 private players accounting for 36.8 per cent of the total life insuranceindustry, witnessed a decline in first year premium income, as per an analysis of data released by IRDA .

At the end of fiscal 2010-11, the private sector life insurance companies mopped up Rs 30,451 crore, againstRs 31,618 crore in the April-March period of previous fiscal.

In terms of policy sales also, the private players saw a huge decline of 23 per cent for the year ended March2011 at 1.11 crore.
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The companies which witnessed a surge in the first year premium figures include Max New York Life , HDFCLife, SBI Life and ICICI Prudential.

At the end of March 31, 2011, Max New York Life's first year premium income grew by 10 per cent, to Rs 1,934crore.

Further, HDFC Life saw an increase of about 27 per cent, Indiafirst Life (about 155 per cent), SBI Life (about 7per cent) and ICICI Prudential (about 4 per cent).

However, market leader Life Insurance Corporation's (LIC) first year premium income rose by 4 per cent to Rs52,204 crore during the April-March 2010-11.

In terms of policy sales too, LIC witnessed a decline of 5 per cent to 3.70 crore.http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/pvt-life-insurers-first-year-premium-down-4-pc-in-fy11/articleshow/8082005.cms

Post-Sept norms hit life insurance bizNiladri BhattacharyaBusiness Standard

Despite robust collections in March, first-year premium collections by life insurance companies rose only 15.13

per cent in 2010-11, the lowest rise since 2002-03. The industry had declined by 14 per cent in that period.

In the last three years, the life insurance industry registered a growth of 25 per cent in new premium income.However, sales this year took a hit after new norms were introduced in September 2010. The first six monthsof the financial year accounted for most of the growth in premium income.

In 2010-11, the life insurance industry collected`1,25,826 crore through the sale of new policies, compared with `1,09,290 crore collected in the correspondingperiod a year ago.

Life Insurance Corporation of India (LIC), the countrys largest life insurer, collected `86,445 crore by sellingnew policies in 2010-11, a rise of 22 per cent over `70,891 crore in 2009-10. In the same period, privateinsurers recorded a marginal 2.55 per cent rise in premium collections at `39,381 crore, compared with `38,399crore in 2009-10. The private life insurance industry would take some more time to stabilise and adjust to thenew norms on unitlinked products that were introduced in September, 2010. In the current financial year, we

expect the private life insurance industry to grow by around 20 per cent, said K Sahay, managing director andchief executive, Star Union Dai-ichi Life Insurance.

ICICI Prudential, which pipped SBI Life to become the largest private life insurer in terms of new businesspremium income, collected premiums worth `7,861 crore in 2010-11, up 24.10 per cent over

`6,334 crore collected in 200910. SBI Life increased its new business to `7,571 crore, a rise of 7.5 per centcompared with`7,040 crore collected in the previous financial year.

General Insurers Grow 21.7 Per CentThe gross written premium of the general insurance industry rose 21.7 per cent in 201011, compared to theprevious financial year. According to data collected by insurers, the industry collected `42,568 crore by writingnew policies in 2010-11, compared with

`34,984 crore in the previous financial year. Private insurers fared marginally better than their stateownedpeers in 2020-11, registering a growth of 22.5 per cent at `17,567 crore. The four state-owned generalinsurance companies - New India Assurance, National Insurance, United India Insurance and OrientalInsurance - collected `25,002 crore, a rise of 21.12 per cent compared to the previous year. During March,the industry collected `4,656 crore through the sale of new policies, a growth of 15.14 per cent over `4,043crore in the same period a year ago.

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General Insurance

Magma''s insurance arm to commence operations in current fiscalPTISee this story in:Yahoo India

Mumbai: Kolkata-based non-banking financial company, Magma Fincorp, today said its insurance arm MagmaHDI General Insurance will commence operations in current fiscal.

"We have received the R1 license from the insurance regulator Irda. After other formalities including R2 and R3licences, we hope to start operations by end-this fiscal," Magma Fincorp''s Vice Chairman and ManagingDirector, Sanjay Chamria told PTI on the sidelines of a press meet here.

Magma has signed a joint venture with HDI Gerling, part of Talanx Group, Germany''s third largest insurance

group to start a general insurance company in India, which since has received R1 license from the insuranceregulator.

Magma will hold 74 per cent while HDI Gerling will hold 26 per cent in Magma HDI General InsuranceCompany, Chamria said.

Meanwhile, Magma Fincorp reported a significant increase in disbursements, revenue, PAT and in assetsunder management (AUM) in Q4 FY 11 over the corresponding quarter last year. The disbursementsincreased at a steady 41 per cent to Rs 1,955 crore while revenue increased 24 per cent to Rs 269.8 crore.

The company recorded profit before tax (PBT) of Rs 66.4 crore and profit after tax (PAT) of Rs 44.9 crore, anincrease of 57 per cent and 70 per cent, respectively in Q4 FY 11 over the corresponding period last year.http://in.finance.yahoo.com/news/Magma-insurance-arm-commence-pti-1020066202.html

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Health Insurance

Add extra cover to your office mediclaimPreeti KulkarniThe Economic Times

Group health insurance covers provided by employers are a great source of comfort for millions of employees.Such schemes typically pick up the hospital bills of employees and their family members. However,their utilityvalue ranks the highest when it comes to the employees' elderly parents or inlaws . Generally, many healthinsurers dither from extending covers to senior citizens , as the likelihood of individual claims is quite high in

this category. Even when they do, many senior citizens find the premiums to be beyond reasonable limits. Littlewonder then, that employees treat employers' group health cover as a godsend.

However, last year, some companies and health insurers decided to impose ceilings on the benefits in order tocontrol mounting losses in their health portfolios. In most cases, this took the form of introduction of the co-payclause. A few organisations completely excluded the cover for parents, while some others transferred the cost(premium for parents' cover) to employees. "Last year, some companies had capped the benefits provided toemployees' in terms of parental coverage and the trend continues this year as well," says Sanjay Datta, head,health insurance, ICICI Lombard. Adds Damien Marmion, CEO, Max Bupa: "Organisations are looking atmanaging their costs better. So, one of the ways for insurers to take care of both ends is to maintain the same
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costs, but revise their service offering.

Limiting the coverage to just the employee, introducing co-pay, etc are some of the changes that are beingmade towards this end." Some companies also offer employees the option of paying an additional premium forextending the cover to their families or increasing the cover amount. "Due to claim ratios being unhealthy in theparents' segment, insurers have either hiked the parents' premium ranging from 30% to 100%, or added newrestrictions like co-pay , deductibles, treatment sub-limits and so on," says Mahavir Chopra , head, e-business ,medimanage.com, an insurance broking portal. The changed scenario means that whether your organisationtightens its belt or not, you need to be prepared for the possibility that your parents could be left out of thegroup cover . You will also be entitled to deductions under Section 80D for the mediclaim premium that youpay for your parents.

SITUATION 1

If parental cover is scrapped altogether: It could be a major setback, but companies seldom take such a drasticmeasure. But, you will be better off reducing your reliance on your company's largesse even otherwise. "It'shigh time employees stop depending only on the employer-enabled parental coverage and start evaluating agood health insurance product, preferably offering lifetime coverage. As parents get older, the chances ofgetting a good cover with wider coverage terms in the retail health insurance space decreases substantially,"says Chopra. If your parents are senior citizens, you could look at senior citizen health policies offered bysome health insurers. Also, opt for the largest possible cover for your parents.

SITUATION 2

Cover comes with the co-pay clause: Copay clause refers to the arrangement where the policyholder (in thiscase, the employee) agrees to share the claim burden in a pre-defined proportion, with the insurer chipping inwith the balance. Copay ratios usually range between 10% and 25%. That is, for every claim of . 100 made,the policyholder will have to shell out Rs 25 (assuming 25% to be the co-pay ratio) while the insurancecompany foots the bill for Rs 75. Your plan of action in this case would depend on the terms of the schemeoffered by your employer. If the benefits under such plans, particularly the pre-existing diseases cover, are notoffered by other individual health policies available in the market, you can consider giving your assent to thisarrangement . "If the policyholder feels that the group cover is insufficient, he can opt for a top-up cover," saysDatta. Such covers get triggered only after the limit under the basic policy is breached. Now, suppose yourcompany covers your parents to the extent of Rs 2 lakh, which you feel is inadequate. You can buy a topuppolicy, of say Rs 1 lakh, that will become effective only if the entire sum assured of Rs 2 lakh is exhausted.Going for a topup will be a cheaper option than buying a regular policy. To boost the health cover further, you

can look at buying benefit policies for your parents. Offered mainly by life insurers, such policies hand out apre-fixed sum once the claim is made. Some policies also provide a pre-agreed amount based on the numberof days spent in the hospital. The claim approval process is relatively smoother and does not entail submissionof original bills and documents. You can make a claim under such policies even if you have already beenreimbursed by the corporate cover.

SITUATION 3

The company provides parental cover, but employee has to bear the premium cost: Again, the terms of thegroup cover would be key here. Often, health insurers are more generous while dealing with corporatemediclaim policyholders. They get a preferential treatment in the sense that insurers try to ensure that theservice offered to this category is satisfactory . A case in point is the withdrawal of cashless facility last year fortreatment at certain 'corporate' hospitals. Public sector insurers, who took a strong stand against suchhospitals after accusing them of charging exorbitant rates, spared corporate policyholders from this ordeal.Also, as mentioned earlier, the fact that most group health policies cover pre-existing illnesses could work in

their favour. Personal health policies exclude pre-existing illnesses from terms of coverage for the initial 1-4policy years, depending on the insurer. Making a decision in this scenario calls for a thorough cost-benefitanalysis.

You need to compare the premium payable and benefits provided vis-a-vis what is available in the market."The employee should also know that the premium he is paying will not be refunded, if he separates from hisemployer. Also, he would, in most cases, not be able to carry forward special group benefits (like coverage ofpre-existing diseases, maternity) to an independent policy that he may wish to buy at that stage," explainsChopra . Therefore, it ultimately boils down to the needs of individuals as well as their families and the pricetag for the offerings in the market that can meet these requirements. "And, in all cases, even if the employee


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decides to opt for the group cover, investing in an independent personal policy for parents makes huge sense.After all, the employee can move to another organisation that may not offer parental cover , or, may not offer iton similar terms. Moreover, the parallel retail policy would also act as a top-up in case of a claim exceeding thesum assured under the group policy," says Chopra.

TOMORROWGet smart, use goal-based investingCopyright 2011, Bennett, Coleman & Co. Ltd. All Rights Reserved"http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/add-extra-cover-to-your-office-mediclaim/articleshow/8033416.cms

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Why critical illness cover is so crucial for everyoneSanjay DattaThe Economic Times

Overwhelmed, Gupta breathed a sigh of relief when he discovered that even after missing three EMIs for his

home loan, his dream house continued to be his. Despite the most sophisticated heart surgery and medicalattention, his savings were untouched. This 37-year-old manager, with no previous medical history of anyillness, had never imagined in his worst nightmares that the ever-growing work related stress would land him inthe ICU of a hospital. Gupta found himself surrounded by life-supporting equipments and a battery of doctorsstruggling to keep his heart beating. Gupta, the most unlikely to suffer a severe cardiac arrest, had lived adisciplined life with cautious food habits and regular exercise. However, more often than not, he brought hiswork stress home and with every promotion came along increased levels of stress and anxiety .

He woke up to realise he had been unconscious for several weeks after the heart attack. Amidst the chaos, ithad not occurred to anyone that the immediate financial burden arising from the cost of two long months ofhospitalisation including ICU charges , cost of medicines , regular check-ups , was paid for by his homeinsurance policy. None of the EMIs for his home loan had bounced, as the loan was insured. Fortunately, threeyears ago, Gupta had opted for the critical illness cover in his bancassurance home loan insurance policy,which not only kept three EMIs for his home loan from bouncing but also covered his medical bills, keeping himfrom digging into his savings during contingency.

The procedure to obtain such a cover was also simple, as all it required was just a simple declaration of hishealth. There was no medical check-up either. The thought of not losing his life-long investment facilitated hisspeedy recovery. A recent ICICI Lombard analysis hints at a worrying pattern in the occurrence of variouslifestyle diseases in men and women alike. ICICI Lombard's Health Research Cell analysed the claimsdistribution data of the past two years from the company's group health portfolio . The results clearly indicatethat critical diseases such as cardiac ailments, cancer, kidney or renal failure and stroke are affecting people atan early age. It shows that there is an immediate need to address these health risks that affect a large numberof individuals and increasingly so at a younger age.

The cost of treatment or procedures related to critical illnesses is usually high, which may not be covered by anindividual's savings alone. Thus, it becomes imperative to obviate the risk of these lifestyle ailments throughhealth insurance that provides comprehensive protection against critical or lifeendangering diseases such ascancer , coronary artery bypass graft surgery, heart attack, end stage renal failure, major organ transplant ,stroke, paralysis, heart valve replacement surgery, multiple sclerosis cancer, heart attack, stroke and kidney

failure etc. A critical illness cover is a definitive means of countering such risks. It allows you to focus on healthas it takes away the stress about money. Careful assessment of both existent and imminent health risks basedon factors such as age, gender , heredity and lifestyle is essential to determine one's insurance needs andchoosing the right cover. Some general insurance companies have addressed the rising need of healthinsurance in the market by designing comprehensive home loan insurance policies, which pay off the loan,insure the home and simultaneously provide cover against critical illnesses.

These policies encompass covering losses to structure and contents of home, covering living expenses whileone is off work due to the ailment. These policies also ensure that the loan EMIs are not dishonoured in caseof loss of employment in the event of such illnesses. Even in case of unfortunate death or permanent disability
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The four public sector general insurers are New India Assurance, United India Insurance, Oriental Insuranceand National Insurance.After a pay revision of officers and employees during 2010-11, the maximum limit for gratuity has beenincreased from . 3.5 lakh to . 10 lakh for every staff. This is expected to increase the liabilities of the fourinsurers by around Rs. 1,000 crore.Copyright 2011, Bennett, Coleman & Co. Ltd. All Rights Reserved"

Employer can't demand PF interest on terminationAgenciesSee this story in:The Indian Express(Apr 25)

New Delhi: An employer cannot demand interest on the provident fund paid upon termination of an employeein case of his reinstatement by a judicial order, a Delhi Court has ruled while holding that such practice is"illegal".

The court said such a demand can be made only when the money is withdrawn as loan or advance byemployee while in service.

The verdict came on the case filed by a Delhi Transport Corporation (DTC) employee who had challenged thedemand for interest on provident fund amount paid upon termination by the corporation. Later, he wasreinstated by the order of the Industrial Tribunal and the Delhi High Court. "The employer is liable to charge

interest when there is a withdrawal by the employee and not when the same is given to him in pursuance to histermination," senior civil judge Amit Kumar said.

Nem Pal, who was with the DTC since 1979, had challenged the demand made by the corporation for aninterest on the general provident fund (GPF) amount paid to him at the time of his termination. He wasterminated from service in 1993 but was reinstated in the year 2002 with full back wages on the orders of theIndustrial Tribunal and the High Court. Though he had deposited the GPF amount of Rs 23,372 paid to him onhis termination, he was also asked to pay an interest of Rs 36,696 on the employer share in it, which waschallenged before the court.

As per service rules, an employee is liable to pay interest on the GPF amount taken as advance or loan duringhis tenure and cannot be held liable if the same has been handed over to him on his termination from theservices which subsequently was not approved by the Industrial Tribunal as required under rules andthereafter by the High Court, the court said. "In view my findings, the demand of defendants (DTC) for paymentof a sum of Rs 36,646 is declared unlawful, illegal and void abnitio and the plaintiff (Nem Pal) is not required to

deposit this amount with the defendants," Kumar said.http://www.indianexpress.com/news/employer-cant-demand-pf-interest-on-termination/780631/

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PF fund managers may get higher feeThe Hindu Business Line(Apr 24)

Mumbai: The Pension Fund Regulatory and Development Authority (PFRDA) is likely to increase themanagement fee payable to pension fund managers (PFMs). This to incentivise them to market the nationalpension system (NPS).

Currently, PFMs get a paltry 0.0009 per cent per annum as fund management fees.

The 0.0009 per cent fees that fund managers get is an insult. It needs to be revised,'' said Mr YogeshAgarwal, Chairman, PFRDA, after inaugurating Union Bank of India's facilityto handle NPS.

The 3,000-odd branches of the public sector bank will act as point of presence service provider (POP-SP) tofacilitate opening of NPS accounts, receive contribution and offer services such as switching between variousinvestment options.
http://www.indianexpress.com/news/employer-cant-demand-pf-interest-on-termination/780631/http://intranet.hdfcsldm.com/LIBRARY/InsuranceUpdates/INSU_A/INSU_A_2011/InsuranceUpdates_25_4_2011.Htm#tophttp://www.indianexpress.com/news/employer-cant-demand-pf-interest-on-termination/780631/http://intranet.hdfcsldm.com/LIBRARY/InsuranceUpdates/INSU_A/INSU_A_2011/InsuranceUpdates_25_4_2011.Htm#top


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Managing fundsThe PFRDA has authorised seven PFMs to manage the national pension system. The scheme was earliercalled the new pension system. Between them, the PFMs manage a corpus of Rs 9,000 crore.

LIC Pension Fund Ltd, SBI Pension Funds Pvt Ltd, and UTI Retirement Solutions Ltd manage the pensionfunds of government employees who joined service after January 1, 2004.

IDFC Pension Fund Management Co Ltd, ICICI Prudential Pension Fund Management Co Ltd, Kotak MahindraPension Fund Ltd and Reliance Capital Pension Fund Ltd manage the pension funds of all citizens.

The NPS is a voluntary saving scheme based on defined contributions. It seeks to provide old age income andreasonable market based returns to all citizens.In the case of Government employees, the monthly contribution to the NPS is equivalent to 10 per cent of theirsalary and dearness allowance. This contribution is matched by theUnion Government.

However, there is no contribution from the Government in respect of individuals who are not Governmentemployees.The minimum contributions are Rs 500 a transaction and Rs 6,000 a year in the case of all citizens.

Meanwhile, Union Bank of India is looking at a credit growth of about 23 per cent and deposit growth of 20-21per cent in the current fiscal, said Mr M.V. Nair, Chairman and Managing Director.

Net Interest Margin is likely to be steady at 3-3.1 per cent, from 3.25 per cent in the 2010-11 fiscal.

While a 25 basis points hike in rates by the Reserve Bank of India is likely, given the high inflation, Union Bankof India may take a call on increasing lending rates after considering its cost of funds, Mr Nair said. He,however, ruled out a hike in deposit rates for now.http://www.thehindubusinessline.com/todays-paper/tp-economy/article17

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PFRDA chief rules out turf war with IrdaThe Financial Express(Apr 24)

Mumbai: Ruling out any immediate turf war between the Pension Fund Regulatory & Development Authority(PFRDA) and the Insurance Regulatory & Development Authority (Irda) over the regulation of existing pensionproducts of life insurance companies, Yogesh Agarwal, chairman, PFRDA, expects customers to gradually buypension products from pension fund managers (regulated by PFRDA) than life insurers, as the former offerbetter returns on the pension product.

The pension product of the National Pension Scheme (NPS) is one of the best financial products available inthe country. We hope the policyholders having pension products in various life insurance and mutual fundschemes would shift their accounts to the NPS gradually. We are offering a superior return between 12% and14% on pension products, said Agarwal.

PFRDA is not happy with the way banks are implementing the NPS. Launching the NPS through all thebranches of state-owned Union Bank of India in Mumbai on Saturday, Agarwal said, Banks havent evincedinterest in NPS so far. Forget social obligation, the NPS also offers a tremendous business opportunity forbanks in the country, said Agarwal.

There are 50,000 branches of banks in the country as of now. However, merely 4,000 branches, whichcomprises 8% of the total number of bank branches, have implemented the NPS so far.

The total number of NPS account holders as of now is 20 lakh. It comprises 12 lakh central governmentemployees and 2 lakh state government staff. The total corpus under NPS has gone up to R9,000 crore as of
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now, he said.http://www.financialexpress.com/news/pfrda-chief-rules-out-turf-war-with-irda/780535/0

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SEBI

SEBI raises sovereign wealth funds investment ceiling to 20%PTISee this story in:The Hindu Business Line

New Delhi: In a move that will enable foreign governments to make more investments in Indian stocks, theSecurities and Exchange Board of India has allowed them to buy up to a maximum of 20 per cent stake in any

listed company without any additional obligations.

The proposed threshold of 20 per cent is twice the current limit of 10 per cent, beyond which sovereign wealthfunds or investment arms of foreign governments need to make an open offer for buying any additional stake.

SEBI, which will grant any such approval on case-by-case basis, has also sought changes in the relevantcentral government regulations about foreign investments, said a senior official.

A proposal to this effect was approved at a SEBI board meeting on March 25 and the new guidelines would beannounced soon, he added.

The move, which would classify various funds of a single country as different entities and not as a single group,is primarily aimed at removing the regulatory hurdles for sovereign wealth funds of the countries with whomIndia has signed Comprehensive Economic Co-operation Agreement (CECA).

Some of the major countries to benefit from the move include Singapore, whose two investment armsTemasek and GIC, have heavily invested in Indian companies and often face problems in buying sharesbeyond the current limit.

The new rules would not equate sovereign funds as any other foreign institutional investors (FIIs) and givethem a preferential treatment.

Sovereign wealth funds invest in India via the foreign institutional investment route and/or through foreigndirect investment/ foreign venture capital route.

For this purpose, at times these funds use multiple investment vehicles (two to three), which may differ interms of investment objective and structure, a SEBI board memorandum said.

Having regard to this, one Comprehensive Economic Co-operation Agreement signed by India recognises

such investment vehicles of the sovereign as independent of each other for the purpose of application of theSEBI rules, regulations and guidelines, it added.http://www.thehindubusinessline.com/companies/article1709273.ece

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Acting in concert wont apply to SWFs
http://www.financialexpress.com/news/pfrda-chief-rules-out-turf-war-with-irda/780535/0http://intranet.hdfcsldm.com/LIBRARY/InsuranceUpdates/INSU_A/INSU_A_2011/InsuranceUpdates_25_4_2011.Htm#tophttp://www.thehindubusinessline.com/companies/article1709273.ecehttp://www.financialexpress.com/news/pfrda-chief-rules-out-turf-war-with-irda/780535/0http://intranet.hdfcsldm.com/LIBRARY/InsuranceUpdates/INSU_A/INSU_A_2011/InsuranceUpdates_25_4_2011.Htm#tophttp://www.thehindubusinessline.com/companies/article1709273.ece


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The Financial Express

New Delhi: Investments by sovereign wealth funds (SWFs) in Indian stock markets will now get more leewaythan those by domestic financial institutions, according to a proposal being finetuned by the Securities andExchange Board of India (Sebi).Further, by delinking sovereign funds from the category of foreign institutional investors (FII), the regulator willeffectively create a new class of investors. The plan will be put up for approval by the Sebi board. The proposalwill also need corresponding clearances from the RBI.

The key difference between sovereign wealth funds and domestic financial institutions will be in the clauseacting in concert, explained a top official. So, Temasek and GIC, the two sovereign funds from Singapore willbe treated as two separate entities that have no link with each other. This is as per the terms of theComprehensive Economic Cooperation Agreement India has signed with Singapore. A government sourcesaid the changes were made with the perspective of the Singapore wealth funds, but could obviously beextended to other nations too.

Each of those funds can invest up to 15% or say, the proposed 25% of equity in a company as per aparallel change planned by the Sebi in its new takeover code. The implication is, in aggregate, they can holdup to 50% in an Indian listed company, subject to the foreign investment limit for the sector. Only when theycross 50% will they need to make an open offer.

But an Indian group that floats two entities, for example, a mutual fund and a wealth management company,can cumulatively invest only up to 25%, even under the new takeover code.

This is because the two entities will be treated as acting in concert. After the changes are approved by theSebi board, a sovereign fund will have far more leeway than FIIs in the stock market too. The FIIs will still besubject to the rule that individually, their investment must not exceed 10% in a company and as a group, notabove 20%. But the improved status for funds from countries with which India has such treaties is expected tocreate a clamour for higher caps from FIIs too.

Greater investment space for SWFs is in line with the interest shown by the Indian government since early thisyear to expand the space for foreign investment. The government has relaxed the rules for what classifies asforeign direct investment while also raising ceilings for FII investment in government and corporate debt.http://www.financialexpress.com/news/acting-in-concert-wont-apply-to-swfs/778549/0

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SEBI to set up forensic accounting cell soonPTISee this story in:The Hindu Business Line

New Delhi: With an aim to catch fraudsters early in their sinister designs, the Securities and Exchange Boardof India will soon set up a forensic accounting cell to identify any bungling in the books and regulatory filings oflisted firms and market entities.

At the same time, the market watchdog would also seek help from outside professionals, use latest technologysoftware tools and put in place its own investigation laboratory to churn out new investigative methods.

The proposed measures would be a part of SEBIs attempts to keep ahead of corporate and accountingfraudsters, and market manipulators, who are suspected of using newer methods and technologies everypassing day to manipulate the rules in the market, a senior SEBI official said.

Having its own forensic accounting cell would help the capital markets regulator avoid any recurrence ofSatyam-like scams, where irregularities in the companys accounts went unnoticed for many years, he added.

Surveillance of markets is going to be one key area of focus for SEBI in the current fiscal and a proposal hasbeen made to increase the effectiveness of its surveillance mechanism, the official said, adding that the samewas discussed at the regulators last board meeting.
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Accordingly, SEBI has decided to create a forensic accounting cell to improve the quality of the financialinformation disclosed and to assist in detection of financial irregularities so as to serve as an effective earlywarning mechanism, he added.

Besides, it has also decided to use latest technology software tools, utilise the services offered by professionalfirms to set up an investigation laboratory which will be used as an incubation room for innovation ininvestigative methods.

The regulator had earlier in February implemented a new tool for speedy analysis of data and identification ofpossible violations like insider trading.

The new tool, named Data Ware Housing and Business Intelligence System (DWBIS), will significantlyenhance SEBIs investigation and surveillance functions and generate reports that will better serve SEBI toidentify, detect and investigate aberrations and market abuses that undermine market integrity.

This tool would help SEBI monitor the trade and order data received by it in order to identify the networkedclients who possibly collectively indulge in violation of securities laws. It will have software functions aimed ataddressing crimes like insider trading, front running, etc.

Besides, SEBI is also working to put in place a unified regulatory filing system for all listed companies and

market entities in a standardised format.http://www.thehindubusinessline.com/markets/stock-markets/article1709402.ece

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Emerging markets back on FII radarLokeshwarri S. K.The Hindu Business Line

Global investors are again ploughing money into emerging markets, including India, as a string of incidentsmars their appetite for developed nations.

According to EPFR Global, the global fund-flow tracker, emerging markets equity funds posted inflows for thethird straight week on April 15, a run that has seen a record $10.3 billion of inflows in the first fortnight of April.On the other hand, flows into developed market funds have slowed sharply with Japan Equity Funds recordingoutflows for the third consecutive week.

This contrasts starkly with the performance in the first quarter of 2011 when developed market funds absorbed$57 billion and emerging markets recorded outflows of $24 billion.

Data published by SEBI supports this trend in global fund flows.

According to the market regulator, foreign institutional investors have turned net purchasers since March. Theywere on the back foot in the first two months of the year, having pulled out over $2 billion up to February. Butflows picked up from March and around $3 billion have been pumped into Indian stocks since then.The change

It may be recalled that there was an all-pervasive concern regarding high inflation, policy rate hikes andslowing rate of growth in emerging economies in the beginning of 2011. This, coupled with improving economicgrowth rate and accommodative monetary policy adopted by developed economies, made funds flow intoequities of developed markets in the first two months of this year.

But the situation began altering in March.

Natural disasters in Australia, New Zealand and Japan have not only interrupted the recovery, they have inNew Zealand and Japan knocked back growth in 2011 significantly, notes Deutsche Bank's Global MarketResearch report.
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Resurfacing credit crisis in eurozone and recent rate hike by the European Central Bank have led to investorspulling money out of this region.

Weakening dollar and political squabble have not helped US equities.

As outlook for developed markets deteriorated, emerging market started looking relatively more attractive.

If fund flow into emerging Asia is considered, India has received the largest portfolio flows among its Asianpeers in 2011, with the exception of Japan where inflows were bloated due to carry trade borrowings.

According to Bloomberg, Asian countries such as Indonesia and South Korea have recorded net outflows thiscalendar. Net inflows into other Asian countries such as the Philippines, Taiwan, Vietnam and Pakistan arelower than that recorded in India.

Some of these external flows could have been routed through hedge funds.

Performance of India-focused hedge funds was extremely robust in March. HedgeFund.net's India index wasup a strong 6.67 per cent in March while hedge funds globally returned an average of 0.06 per cent.http://www.thehindubusinessline.com/markets/stock-markets/article1710098.ece

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Sebi to have own forensic lab to check fraudsAgenciesSee this story in:The Indian Express

New Delhi: With an aim to catch fraudsters early in their sinister designs, Sebi will soon set up a forensicaccounting cell to identify any bungling in the books and regulatory filings of listed firms and market entities.

At the same time, the market watchdog would also seek help from outside professionals, use latest technologysoftware tools and put in place its own 'investigation laboratory' to churn out new investigative methods.

The proposed measures would be a part of Sebi's attempts to keep ahead of corporate and accountingfraudsters, and market manipulators, who are suspected of using newer methods and technologies everypassing day to manipulate the rules in the market, a senior Sebi official said.

Having its own forensic accounting cell would help Sebi avoid any recurrence of Satyam-like scams, whereirregularities in the company's accounts went unnoticed for many years, he added. Surveillance of markets isgoing to be one key area of focus for Sebi in the current fiscal and a proposal has been made to increase theeffectiveness of its surveillance mechanism, the official said, adding that the same was discussed at theregulator's last board meeting.

Accordingly, Sebi has decided to "create a forensic accounting cell to improve quality of the financialinformation disclosed and to assist in detection of financial irregularities so as to serve as an effective earlywarning mechanism," he added.

Besides, Sebi has also decided to use latest technology software tools, utilise the services offered by

professional firms to set up an Investigation Laboratory, which will be used as an incubation room forinnovation in investigative methods.

Sebi had earlier in February implemented a new tool for speedy analysis of data and identification of possibleviolations like insider trading.

The new tool, named Data Ware Housing and Business Intelligence System (DWBIS), will significantlyenhance Sebi's investigation and surveillance functions and "generate reports that will better serve SEBI toidentify, detect and investigate aberrations and market abuses that undermine market integrity."
http://www.thehindubusinessline.com/markets/stock-markets/article1710098.ecehttp://www.thehindubusinessline.com/markets/stock-markets/article1710098.ece


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This tool would help Sebi monitor the trade and order data received by it in order to identify networked clientswho possibly collectively indulge in violations of securities laws. It will have software functions aimed ataddressing "crimes like insider trading, front running, etc."

Besides, Sebi is also working to put in place a unified regulatory filing system for all listed companies andmarket entities in a standardised format.http://www.indianexpress.com/news/sebi-to-have-own-forensic-lab-to-check-frauds/778233/0

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Sebi board to reconsider NSDL caseBijithrThe Financial Express

Mumbai: The Securities and Exchange Board of India (Sebi) will hold a board members meeting later thismonth to reconsider a decision to clear the National Securities Depositories (NSDL) of irregularities related toinitial public offerings (IPOs).

The board meet has been convened to exclusively discuss the NSDL matter, said a senior Sebi official oncondition of anonymity.

The regulator in February 2010 had given a clean chit to NSDL after setting aside the findings of a two-member Sebi committee, which had held the depository accountable for its failure to detect fraud. The presentSebi move was necessitated after the Supreme Court on March 28, 2011, ordered the regulator to reconsiderits earlier decision while hearing a special leave petition (SLP) filed by Social Action Forum for Manav Adhikar,a Delhi-based society.

Since it is a Supreme Court directive, the one option before the regulator is to withdraw its earlier order, whichdeclared null and void the decisions of a special committee that was set up to look in to NSDLs role in thescam, said Sandeep Parekh, founder of FinSec Law Advisors and former executive director at Sebis legaldivision.

In February this year, a Bench headed by Justice RV Raveendran had criticised Sebi, asking why it had

rejected a high-powered committees 2008 report on the IPO scam that indicted NSDL. The matter relates to acase in which few market participants reportedly used close to 60,000 fictitious demat accounts to corner shareallotments meant for retail investors. The practice was noticed in 21 IPOs between 2003 and 2005.

In its February 2011 order, the Supreme Court has asked attorney general GE Vahanvati to present Sebisviews on former chairman CB Bhave and his role pertaining to the IPO scam involving NSDL. Bhave, whoseterm ended on February 17, was earlier the chairman of NSDL.

Bhave, who took over as Sebi chief in 2008 while the markets regulator was still investigating the case,recused himself to avoid charges of conflict of interest. In December 2008, the Sebi committee comprisingMohan Gopal, director, National Judicial Academy, and V Leeladhar, then the RBI nominee on the boardpassed an order directing NSDL to conduct internal inquiries and fix individual responsibility for the lapses thataided the IPO scam.

The report was placed before Sebi on January 21, 2009. However, the regulator dismissed the report on the

grounds that the committee exceeded its mandate and therefore its findings were without the authority of law.Subsequently, Sebi heard the matter afresh and disposed of the case, giving a clean chit to NSDL. We find noevidence that there was any lapse on the part of NSDL in following its own procedures in this regard, Sebisaid in its February 2010 order.http://www.financialexpress.com/news/sebi-board-to-reconsider-nsdl-case/778421/0

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Mutual Funds& AMCs

The nuances between liquid and ultra short-term bond fundsThe Economic Times

Investors use the category of mutual fund schemes called liquid funds (also known as money market funds) forshort-term parking, as these funds are most stable in returns. There is another category of funds known asultra short-term bond funds (earlier known as liquid plus), which are managed in a manner similar to liquidfunds. It is necessary that investors are aware of both types of funds and their respective advantages that willaide in making informed decisions.

Liquid funds are those that are defined as money market funds in the offer document and invest in moneymarket instruments of residual maturity up to 91 days. What sets liquid funds apart in terms of lowest volatilityin returns among all categories of funds is that there is no mark-to-market (MTM) of the portfolio on a dailybasis unless there is a trade in the secondary market in the underlying security (or securities ).

Practically there is no trade in money-market instruments and valuation of daily NAV happens on an accrualbasis, i.e., by adding the coupon accrued for the day witho

insurance updates 20 27 april 2011

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