Will backroom deals and politics make our government waive this crucial condition for LIC to set up shop here? We shall see how things unfold when the Indian business community decides to wield their influence and put pressure on the Singapore regulators.
http://economictimes.indiatimes.com...ticket-to-unrated-LIC/articleshow/6030336.cms
Singapore denies ticket to unrated LIC
MUMBAI: In a decision that may not go down well with New Delhi, Singapore has denied permission to India’s largest financial institution, Life Insurance Corporation of India (LIC), to set up a subsidiary there until it has a credit rating from an international agency.
About a year ago, LIC had sought Singapore’s approval to set up a life company to sell insurance policies, and talks with the local authorities were progressing well.
The state-owned insurer, which runs a representative office in Singapore, was hopeful of getting a licence. But during the final round of negotiations, Singapore authorities insisted that the parent’s rating was a prerequisite for doing business in the island state.
LIC has argued that conventional rating measures would not apply to the corporation since it is a unique entity that functions with only a nominal capital. Unlike other corporate entities and insurance firms, LIC’s paid-up capital is only Rs 5 crore.
The corporation is restrained under law to plough back profits because the entire surplus is distributed between the government and policyholders. LIC’s financial strength is derived from the fact that every policy issued by the corporation is guaranteed by the government.
Management consultants hired by LIC had in the past said the state guarantee amounts to quasi capital and the government should convert it into real capital by reconstituting LIC as a corporate entity.
While LIC has no capital of its own, it has managed to fund its international operations through budgetary allocation whenever it was required.
Significantly, LIC has had some discussions with international credit rating agency Moody’s Investors Service. But, LIC fears that a rating based on the standard parameters will be misleading and not reflect its financial standing.
http://economictimes.indiatimes.com...ticket-to-unrated-LIC/articleshow/6030336.cms
Singapore denies ticket to unrated LIC
MUMBAI: In a decision that may not go down well with New Delhi, Singapore has denied permission to India’s largest financial institution, Life Insurance Corporation of India (LIC), to set up a subsidiary there until it has a credit rating from an international agency.
About a year ago, LIC had sought Singapore’s approval to set up a life company to sell insurance policies, and talks with the local authorities were progressing well.
The state-owned insurer, which runs a representative office in Singapore, was hopeful of getting a licence. But during the final round of negotiations, Singapore authorities insisted that the parent’s rating was a prerequisite for doing business in the island state.
LIC has argued that conventional rating measures would not apply to the corporation since it is a unique entity that functions with only a nominal capital. Unlike other corporate entities and insurance firms, LIC’s paid-up capital is only Rs 5 crore.
The corporation is restrained under law to plough back profits because the entire surplus is distributed between the government and policyholders. LIC’s financial strength is derived from the fact that every policy issued by the corporation is guaranteed by the government.
Management consultants hired by LIC had in the past said the state guarantee amounts to quasi capital and the government should convert it into real capital by reconstituting LIC as a corporate entity.
While LIC has no capital of its own, it has managed to fund its international operations through budgetary allocation whenever it was required.
Significantly, LIC has had some discussions with international credit rating agency Moody’s Investors Service. But, LIC fears that a rating based on the standard parameters will be misleading and not reflect its financial standing.
the kettle calling the pot black
