Insurance cos strike gold as Bollywood runs for cover

Mumbai: Insurance companies have struck pay dirt with a new client—Bollywood films, whose premiums are steadily fattening their bank balance. What was earlier an afterthought, with film-makers running for cover only at the nth hour, is now becoming an extremely lucrative business for insurance companies, with film companies opting for not one or two but four different policies on each film.
    As TOI reported as far back as August, politics, 'public sentiment' and last-minute legal wrangles have made it mandatory for Bollywood to seek cover; subsequently, the amounts for which films are being insured have been rising exponentially. Reliable industry sources say that Karan Johar's My Name Is Khan, currently being shot in Los Angeles, Nikhil Advani's Chandni Chowk to China (slated for a January 16 release) and Aashtavinayak Cine Vision's Blue (which is 60 per cent complete) have been insured for amounts close to Rs 80 crore each.
    Aatur Thakkar of Alliance Insurance Brokers Pvt Ltd, whose company has underwritten these films, refuses to confirm the exact amount, but says, "Things are so vulnerable at this point that insurance companies can underwrite everything except the commercial success of the movie.''
    Thakkar confirms that the three most in-demand policies are the production policy where risks during the production stage are underwritten; the error and omissions policy that usually covers disputes arising out of copyright infringement, defamation, libel/slander and such other issues; and the distributors' loss of profits policy which covers losses that may occur when a film release is stalled on account of riots/terror attacks or even weather conditions.
According to Thakkar, this last policy is fast gaining in popularity. An inside source from Aamir Khan's team confirms that the distributors of Ghajini have bought a distributors' loss of profits cover of Rs 60 crore, beating earlier highs like Karan Johar's policy for Dostana that stood at Rs 25 crore and Percept Picture Company's cover for its animated film Jumbo that reportedly cost PPC approximately Rs 8-10 crore.
    The fourth and much in-demand policy is the change in release date policy that covers risks arising out of postponements. Rohan Sippy's The President Is Coming, for instance, was scheduled for a November release but has been pushed to January 2009 after the 26/11 terror strikes.
    While it seems to be a win-win situation for both insurance companies and Bollywood producers, who have to pay a premium that is a mere 0.5% to 1% of the insurance cover, what happens when the time for claims comes? No one is sure on this score, as no producer has reaped the benefits of his policies yet. However, Dharma Productions have put in their claim for losses that occurred when Dostana screenings were stopped after multiplexes were forced to keep their shutters down after 26/11. The claim is being processed, with the insurance company still drawing up what the estimated losses could be.
    Trade estimates say that the highest business done by a Bollywood film (Singh Is Kinng) across India is Rs 34 crore (net). Yet, the same distributors, Indian Films, insured Ghajini for almost double the amount—a clear indication on how insurance on films has doubled.

SBI to inject funds into insurance arm

Kolkata: The country's largest public sector lender, State Bank of India, is planning to inject fresh capital into its insurance arm, SBI Life, which is awaiting the right market conditions to raise funds through an initial public offering (IPO).
    The company's MD & CEO Uday Sankar Roy, however, denied to reveal the amount SBI Life Insurance intended to bring in as fresh capital. "It is difficult to say now. It will all depend upon the business requirement," he said. Commenting on the IPO, he said: "We are progressing on the IPO. But, in the current market scenario,it is difficult to say at this point of time when it will hit the market." SBI chairman O P Bhat had earlier said SBI Life Insurance, in which the banking major has a majority 76% stake,would hit the capital market by the end of 2009.
    BNP Paribas Assurance holds the remaining 24% stake in the life insurance venture.
    Apart from the volatility of the capital market, the company's IPO might wait for few issues to be settled, including some impending regulatory changes domestically, such as increasing higher foreign direct investment. The government has tabled the Insurance Bill in Parliament aiming to increase the FDI cap in the sector to 49% from 26% now.
    "As on September end, our solvency ratio is 2.6% as compared with the regulatory requirement of just 1.5%," Roy said. SBI Life Insurance has a paid-up capital of Rs 1,000 crore, while the authorised capital is Rs 2,000 crore. The company's market share rose to 14% in the first seven months of the current fiscal against 12% at the end of the last financial year.
    Meanwhile, Roy expects the new business premium income from the last quarter could grow by 30% compared to the corresponding quarter of the last fiscal. AGENCIES

Govt moves to hike insurance investment cap

NEW DELHI: Government on Monday sought parliament's approval to raise foreign investment limits in domestic insurance firms by up to 49 percent, despite noisy protests in the national legislature.
The move sparked protests, resulting in adjournments in the assembly's two houses and verbal attacks on the government, which had kept the proposal in cold storage for nearly four years over fears it would meet political resistance.

Junior finance minister P. K. Bansal was interrupted by leftist MPs who tried to snatch papers as he revealed plans to almost double the cap on overseas capital from the existing 26 percent, a move he said would attract foreign capital.

Private insurance companies

are delighted by the plans but the measure may not be passed in the current session of parliament because of insufficient time.

India must hold general elections by May 2009, meaning the measure could have to wait for a new government.

Foreign insurers have said increasing the limit is important as it will allow them to expand their array of products and improve distribution channels.

Four-fifths of India's 1.1 billion population has no insurance cover and around 90 percent have no pension scheme, forcing them to rely on savings and relatives in old age.

Marxists opposed to the move accuse the government of taking the step to help out cash-strapped companies in the United States.

"The government is trying to bail out bankrupt insurance industries in the US by inviting them to come to India," Marxist MP Brinda Karat argued in parliament.