Insurance Monthly Update – May 2010

YTD APE^# for Indian Life Insurance players grew at a modest rate of 5.7% in May ’10 on account of weak performance exhibited by the private players. Amongst the private players the weakest performers included Canara HSBC OBC Life (-54.6% yoy), Bajaj Allianz (-51.8% yoy) and Max New York (-50.5% yoy) in terms of APE. However, LIC continued to hold on to its growth momentum with an APE growth of 16.5% yoy.

In a recent development, IRDA has finalized new ULIP norms (effective Sep 1, 2010), which include 1) Extension of lock in to 5 years from 3 years earlier, 2) Compulsory guarantee of 4.5% return on pension products, 3) Cap on charges at 4% for policy lapse/surrender after 5th year and 4) Minimum sum assured increased to 10x of premium from 5x earlier. We believe, these norms will restrict premium growth in FY11.