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Term insurance premium set to rise as reinsurers tighten norms due to pandemic

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The term insurance premium is set to rise by anywhere between 15 per cent to 40 per cent after reinsurers tightened underwriting norms in the wake of the Covid-19 pandemic.

While Munich Re has tightened underwriting norms, GIC Re had hiked rates earlier this year.

“GIC, which is our reinsurance company, had hiked rates in March and it came into effect from April. While till now we have not passed on the increased rates to customers but now we feel the need to increase rates on term plans taking into consideration our profitability. We will be increasing our rates on the term side this calendar year in the range of 15 to 20 per cent, depending on age, sum assured and quality of life of the individual,” said Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance.

Vighnesh Shahane, MD and CEO, Ageas Federal Life Insurance, pointed out that over the last 18 months of the pandemic, and especially during the second wave, reinsurers have been badly hit by the surge in claims, and there has been a lot of pressure on them to hike rates.

“We estimate that term plan prices are likely to rise by around 20 per cent to 40 per cent across the board. However, the exact rise will vary from company to company, and from reinsurer to reinsurer. It will also depend on the amount of business that the life insurance company does with the reinsurer,” he said.

Wait and watch mode

Meanwhile, some life insurers are still on a wait and watch mode in the expectation that reinsurers’ rates would come down later once the pandemic passes in six months to a year.

While the pandemic has increased awareness and demand for life insurance products, particularly term life products, insurers have also paid out high claims, especially after the second wave of the pandemic. Claims for the sector in the second wave were up by two to three times of the first wave of the pandemic.

“The life insurance sector witnessed significant claims in the first quarter of the fiscal due to the second wave of the pandemic and profitability suffered as companies made provisions or reserves to alleviate the impact of the claims,” Care Ratings had said recently, adding that the life insurance premiums are expected to witness significant movement over 2021-22.

However, key risks such as a delay in the economic recovery and resurgence of Covid cases with a third wave could negatively impact premium growth, and rise in term plan premium rates.

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CBDCs are designed to be very stable: IMF

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“About 80–100 Central Banks around the world, including in G20 nations, are exploring central bank digital currencies (CBDC) and are in some sort of pilot or testing stages,” said Tobias Adrian, Financial Counsellor and Director – Monetary and Capital Markets Department, IMF at the Global FinTech Fest.

The three-day Fest, which concluded on September 30, was attended by over 26,000 delegates from 121 countries. Policymakers, technocrats, investors, founders, economists, bankers, participated in the Fest. The event was organised by National Payments Council of India (NPCI), Fintech Convergence Councill (FCC), and Payments Council of India (PCI) of Internet and Mobile Association of India (IAMAI).

Differ from bitcoin

“CBDCs are designed to be very stable, stable in value, with a low transaction cost and backed by the Central Bank for added consumer confidence, very different from bitcoins which fluctuate in value and are more like an investment asset,” Tobias Adrian said.

Also see: The time for central bank digital currencies has come

There could be a lot of innovations in Central Bank issued digital currencies, especially across payments and lending platforms.

“CBDCs could indeed be somewhat similar, not necessarily the same, to bitcoin assets, could be based on blockchain technology, could be available in wallets. It depends on whether the design is based on existing payment systems or using very powerful blockchain technologies,” he added.

Drawbacks

Meanwhile, he warned that cybersecurity could be a major challenge for CBDCs. “You need to make sure that the system is resilient against cyberattacks.” It’s not the technology alone, but the intersection of technology and human.

Also see: Central bank digital currency can boost innovation in cross-border payments: RBI Deputy Governor

Secondly, CBDCs might undermine existing banks so banks need to upgrade their technologies to compete.

Finally, the lack of universal cellphone access may limit CBDC penetration.

On expensive cross-border payments, Adrian envisioned that cross-border transfers would be a lot cheaper for a small amount of payments. There are some wallet exchanges available that allow one to convert US dollar into rupee stable coin, with an implicit fee that is cheaper. However, there are a lot of discussions going on between Central Banks of various countries to make cross-border payments cheaper.

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Indian Gold Rates Can rise In October Even As USA Inflation Rises To 30 Years High

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Personal Finance

oi-Kuntala Sarkar

|

October gold prices started to gain since Thursday this week, after a 3 months low range and it was expected that the first week of October might be following this trend. But the USA’s Core Personal Consumption Expenditure (PCE) reports, August came out on Friday showing a sharp rise in inflation at 4.3%. It is their highest inflation figure in the last 30 years, since 1991. So, the international gold rates are going to impact intensely as this inflation hike can force US policymakers to maintain the status quo in their monetary policy. This can help the gold prices to gain further.

Indian Gold Rate Can Rise In October Even As US Inflation Rises To 30 Years High

The Core PCE is preferred by the US Federal Reserve, as they think it is a more accurate measure of inflation than the CPI. PCE tacks “a broader range of goods and gives more weight to substitution – when consumers buy a cheaper product to substitute for a more expensive one”. The US Fed Chair Jerome Powell’s earlier dovish sentiment can be in-depth again. USA’s target to keep the inflation rate around 2% failed in August, and this data will restrict them from increasing the interest rates soon or halt them from taper the liquidity infusion on large scale. So, the gold prices can rise again to the $1780 level, approximately. Investors will be again taking shelter under gold. The precious metal is a hedging tool for investors against inflation. Gold rates are likely to gain with higher inflation, beating equities or bonds. Hence the gold traders can think of it as a silver lining now, although common buyers are going to lose.

Last traded prices

Today, on Saturday, the spot market and futures markets are closed. Till Yesterday, on October 1, gold prices in the Comex December futures stayed around $1760/oz and spot gold prices reached even $1765/oz at some point. MCX October gold future also rose to Rs. 46,500 yesterday, till last traded. If this bullish sentiment works again on Monday, the market might get to cross this range and be at $1800/oz. According to experts, “The $1,750 level is now a support, and $1,800 is resistance.” In India, 22 carat gold was quoted at Rs. 45,470/10 grams and 24 carat gold was quoted at Rs. 46,470/10 grams, till yesterday.

Market volatility

However, the Indian gold market is going to stay quite volatile this month. Although the prices are rising now, any time the situation can flip. Because apart from the US PCE data, traders are concerned about November Fed meet. Traders, in the last week of October, will be busy anticipating the US tapering timeline. Tapering can drag down the gold rates.

India imports gold from foreign markets, so Indian gold rates depend on International prices. If the gold prices rise in the international markets this month, the domestic gold markets will walk on the same path. So, it will be a good time for Indian gold jewellers ahead of the festive season. The India Bullion and Jewellers Association (IBJA) was trying to keep the gold prices strong now, as the gold purchase increases considerably during the festive seasons. People buy gold substantially for marriage or other auspicious occasions, and poor gold rates could have doomed their business. However, the common buyers will have an added pressure on the prices.

Story first published: Saturday, October 2, 2021, 12:36 [IST]



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This Company IPO Has Unique Business Model On The Cusp Of A Large Opportunity

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Investment

oi-Sunil Fernandes

|

Motilal Oswal Institutional Equities recently analyzed Nykaa’s DRHP to understand the opportunity in the BPC and Fashion segments, the company’s business model, and the competitive landscape. The company is likely to come-up with an IPO shortly and Motilal Oswal institutional Equities believes the company has a unique business model on the cusp of a large opportunity.

This Company IPO Has Unique Business Model On The Cusp Of A Large Opportunity

Large market opportunity

The brokerage conducted an online survey among the target demographics and presented its findings. According to the same, the Indian Beauty and Personal Care (BPC/Fashion market is expected to reach Rs 2t/Rs 8.7t by CY25 – posting a CAGR of 12.7%/18% from CY20. The online BPC and Fashion markets are growing at an even faster pace.

“While online channels account for just 8% of India’s BPC market, it is pertinent to note that 70% of the market is estimated to be unorganized. Thus, online channels are estimated to contribute 27% to the organized space, and Nykaa is well-placed to lead the online/organized portion of this market growth with a proven business model,” the brokerage has said.

According to Motilal Oswal one of Nykaa’s key strengths lies in its inventory-led business model for the BPC segment. “While it assumes the risk of obsolescence and bears an inventory cost, it allows the company to offer authentication for all its products, ensure availability, and enable efficient distribution. Its technology is geared to enable fungible inventory across onlineand offline channels, allowing for efficient inventory management. As seen from our survey responses, the widespread availability of spurious products is a concern among online BPC consumers. Accordingly, a guarantee of authenticity offers comfort to customers,” the brokerage has said.

Influencer network

With a network of over 1,300 influencers and 12.6m followers across leading social media platforms, Nykaa is able to drive widespread product and influencer-led education through creative and entertaining content across video and written formats.

“Nykaa creates and films the majority of its content in-house through the Nykaa Army. Moreover, it leverages influencers on a large scale through the Nykaa Affiliate Program, enabling external content creators to publish content on their behalf across several digital platforms. Endorsement by well-known influencers further strengthens the trust in the platform,” the brokerage has said.

The pricing and the date of the IPO is not known, but, if you go by the Motilal Oswal report and the markets at record peaks, even this IPO should get a solid response.

Story first published: Saturday, October 2, 2021, 9:52 [IST]



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5 Hybrid Funds With Good Ratings For SIPs When Markets Are At A Peak

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Why you should start SIPs in conservative hybrid funds?

As an SIP investor, the one thing that you want to do is generate returns and protect your capital. Those who have invested in SIPs largely through largecap, midcap, small cap and flexi cap funds have gained whopping returns in the last few years.

Now, with the Sensex at nearly 60,000 points, you are buying into an SIP at a whopping 50,60, 70 and maybe 100 per cent higher NAV than what was prevailing a year ago. It’s time to now look at hybrid funds, which have a conservative approach, in a sense they might invest moderately through equity, with a large exposure to debt. Conservative hybrid funds invest roughly a quarter of the money in equity shares and the rest in bonds. The Sensex at nearly 60,000 points is offering very little value and most stocks have gone-up significantly.

A few hybrid funds to consider for starting SIPs

A few hybrid funds to consider for starting SIPs

We see little point in investors continuing their SIPs in 100% equity mutual funds, as you would continue to be buying units at a higher NAV. Here are a few conservative Hybrid funds to consider, which are rated No 1 and No 2 by CRISIL in the conservative hybrid category.

CRISIL rating 1-year returns
Canara Robeco Conservative Hybrid Fund No 1 14.76%
LIC MF Debt Hybrid Fund No 1 8.67%
Kotak Debt Hybrid No 2 19.64%
HSBC Regular Savings Plan No 2 12.44%
Franklin India Debt Hybrid Fund No 2 13.38%

Once markets fall, there maybe an opportunity to change the approach again and move money to pure equity funds. A recent report by one of the top brokerages in the country suggested that the Sensex is trading a premium of almost 20% to long-term averages. This means equities are turning expensive and with interest rates across the globe headed higher, we might see equities continue to under perform, given where the markets are.

Disclaimer:

Disclaimer:

Investing in mutual funds poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and investors should exercise some discretion.



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Crypto assets pose financial stability challenges: IMF report

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The rapid growth of the crypto ecosystem presents new opportunities, the IMF has said, but also cautioned that the digital currency assets pose financial stability challenges. Cryptocurrencies are digital or virtual currencies in which encryption techniques are used to regulate the generation of units and verify the transfer of funds, operating independently of a central bank.

“The rapid growth of the crypto ecosystem presents new opportunities. Technological innovation is ushering in a new era that makes payments and other financial services cheaper, faster, more accessible, and allows them to flow across borders swiftly,” it said in a chapter of its latest report Global Financial Stability Report.

Innovative financial services

Crypto asset technologies have potential as a tool for faster and cheaper cross-border payments. Bank deposits can be transformed to stable coins that allow instant access to a vast array of financial products from digital platforms and allow instant currency conversion, said the IMF in its chapter titled The Crypto Ecosystem and Financial Stability Challenges.

Decentralised finance could become a platform for more innovative, inclusive, and transparent financial services, it added.

Volatile currency

“Despite potential gains, the rapid growth and increasing adoption of crypto assets also pose financial stability challenges,” the IMF said.

In a recent interview with PTI, Tobias Adrian, the Financial Counsellor and Director of the Monetary and Capital Markets Department of IMF, said that Bitcoin could lead to instability because it is extremely volatile. It was trading above 65,000 earlier this year, and then it came down to below 30,000.

“It might go back up, it might go back down. So if you’re a merchant, and you’re quoting in Bitcoin, you’re exposed to this massive volatility. It is much more volatile than equities or commodities or even exchange rates. It’s a very, very volatile asset, and that is introducing instability,” he said.

“It’s fine as an investment asset. But as a monetary aggregate, it just doesn’t have the right properties,” he added.

Also see: Indian cryptocurrency market likely to reach up to $241 million by 2030: Nasscom

“And let me just add two more problems with that. One is that transaction costs can be fairly expensive and compared to digital money, as it’s the case in India for example, where you have a real-time gross settlement payment system, it’s actually slow because it’s a distributed ledger, and to know that the transaction has gone through, it has to be verified on all of these different computers. So, it’s not that instantaneous, and it can be expensive to transact and it’s extremely volatile. It doesn’t have the properties that you want money to have,” Adrian said.

Destabilise capital flows

The IMF in its report said that challenges posed by the crypto ecosystem include operational and financial integrity risks from crypto asset providers, investor protection risks for crypto-assets and DeFi, and inadequate reserves and disclosure for some stable coins.

“In emerging markets, the advent of crypto assets has benefits but can accelerate cryptoisation and circumvent exchange and capital control restrictions. Increased trading of crypto-assets in these economies could destabilise capital flows,” it said.

Need for regulation

“Policymakers should implement global standards for crypto-assets and enhance their ability to monitor the crypto ecosystem by addressing data gaps. As the role of stable coins grows, regulations should correspond to the risks they pose and the economic functions they perform. Emerging markets faced with cryptoisation risks should strengthen macroeconomic policies and consider the benefits of issuing central bank digital currencies,” the report said.

Also see: China declares all cryptocurrency transactions illegal

In a joint blog post, three IMF officials Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou wrote that as crypto assets take hold, regulators need to step up.

“Crypto-assets offer a new world of opportunities: Quick and easy payments. Innovative financial services. Inclusive access to previously “unbanked” parts of the world. All are made possible by the crypto ecosystem,” they wrote. “But along with the opportunities come challenges and risks,” it added.

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RBI may signal policy normalisation on Oct. 8, StanChart says, BFSI News, ET BFSI

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The Reserve Bank of India is likely to signal the start of an unwinding of its accommodative monetary policy, introduced to cushion the economic impact of the pandemic, at a meeting next week, economists at Standard Chartered Bank wrote in a research note on Friday.

The consensus view is that the RBI will leave interest rates unchanged at its Oct. 8 MPC meeting and only start to unwind its accommodative monetary policy by reducing the gap between the repo and reverse repo rates early next year.

Some economists, including those at StanChart, however have brought forward their policy normalisation expectations amid concerns of rising domestic inflation from high oil and global commodity prices and a sharp increase in the pace of vaccination.

“We now expect India‘s Monetary Policy Committee (MPC) to hike the reverse repo rate by 40 basis points to 3.75% at the December 2021 and February 2022 policy meetings; we had earlier expected the hikes in February and April 2022,” the Standard Chartered economists said.

They expect the MPC to raise the key repo rate only in August 2022 but said the risk of an earlier hike has increased. They also acknowledged the risk of a nominal increase in the reverse repo rate on Oct. 8, on account of the higher cut-offs at recent variable rate reverse repo auctions.

“Unlike VRRR cut-offs/sizes and tenor, a reverse repo rate hike is a firmer signal of policy normalisation, in our view,” the economists said.

“We think a firmer signal is warranted when the risk of another surge in infections is largely ruled out. Additionally, with India entering the festival season, supportive monetary policy is likely to help sentiment and demand,” they added.

Nomura also expects a 40 bps reserve repo rate hike in December and a total of 75 bps repo and reverse repo rate hikes throughout 2022.

“We still believe that RBI’s normalisation strategy will hinge upon the growth outlook, and not inflation,” Rahul Bajoria, economist at Barclays said in a research note.

“Macro indicators show that India’s activity levels have begun to normalise, and with the economy recovering faster than anticipated, the RBI has more options to calibrate an exit, both through communication and actions, in our view,” he added. (Reporting by Swati Bhat. Editing by Jane Merriman)



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HSBC, Yes Bank join rate cut war; foreign lender to offer mortgage from 6.45%, BFSI News, ET BFSI

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Mumbai, HSBC on Friday reduced rates on its home loan products, offering mortgages at 6.45 per cent – one of the lowest in the industry – for balance transfers. For fresh loans, the British lender’s local branches will offer lending at 6.70 per cent, which is at par with sector leaders like SBI and HDFC.

Yes Bank also cut its rate to the same level in a review and is aiming for doubling the book size during the limited period offer.

Last month, private sector lender Kotak Mahindra Bank cut its interest rates to offer home loans from 6.50 per cent onwards, forcing others to also review their rates. Credit growth is at low levels amid a flush of liquidity which is leading to the rate cuts.

HSBC India said its rate has been reduced by 0.10 per cent to 6.45 per cent for balance transfers, wherein existing borrowers being served by rivals are enticed to switch the remaining loan amounts to a newer lender by aggressive offerings.

Home loans are generally considered safer bets because of the underlying security, and waning of COVID infections has also prompted healthy pick-up in home buys.

In a statement, the bank said it has also waived the processing fee for these loans and added that the rate offering will be applicable only till December 31.

“We believe this reduction in the home loans rates will help reduce the interest burden of customers and make homeownership more affordable,” its head of wealth and personal banking, Raghujit Narula said.

The bank currently offers home loans of up to Rs 30 crore to all customer at 6.70 per cent.

Meanwhile, private sector lender Yes Bank also announce a cut in its offering to 6.70 per cent, as per a statement, which also said salaried women will get credit at 6.65 per cent.

“Given our focus on further building the retail book, home loan is segment we are looking at expanding and envisage growing the book size by 2X over the next three months,” its chief executive and managing director Prashant Kumar said. PTI AA ANU ANU



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J&K Bank gets shareholders’ nod to raise up to Rs 2,000 cr via equity, debt, BFSI News, ET BFSI

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Jammu and Kashmir Bank on Friday said it has received shareholders‘ nod to raise up to Rs 2,000 crore through equity and debt to fund its business. The shareholders at the annual general meeting on Friday approved the plan to raise equity and debt capital of up to Rs 1,000 crore each.

They approved raising of equity capital of up to Rs 1,000 crore in one or more tranches by way of rights issue/preferential allotment/private placement or qualified institutional placement (QIP) or any other approved mode, the bank said in a regulatory filing.

Also, shareholders approved raising up to Rs 1,000 crore by issuing Basel III compliant tier-II bonds in the nature of non-convertible debentures on a private placement basis.

Shareholders also cleared the appointment of Nitishwar Kumar and Mohmad Ishaq Wani as directors. PTI DP ABM ABM

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Nigeria gets $400 million in World Bank financing for COVID-19, BFSI News, ET BFSI

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LAGOS – Nigeria got approval on Friday for $400 million in World Bank financing to procure and deploy COVID-19 vaccinations, the bank said in a statement.

The World Bank board of directors signed off on the financing, provided via the International Development Association, which it said would enable Africa’s most populous nation to purchase COVID-19 vaccines for 40 million people, some 18% of its population, and support vaccine deployment to 110 million people.

In a statement, the bank said the money would ensure that the government can vaccinate 51% of its population within two years and “avoid the dreadful consequences of another lockdown that left in its wake an economic toll the country is still grappling with.”

The government last month said that around 20% of workers in Nigeria had lost their jobs as a result of COVID-19.

Nigeria has administered some five million vaccine doses to its 200 million citizens, and is in the midst of deploying millions more doses of Moderna and AstraZeneca shots received through the COVAX scheme aimed at providing vaccines to developing countries.

It also has 1.12 million doses of the Johnson & Johnson vaccine that it purchased through an African Union programme and is also scheduled to receive 7.7 million doses of the Sinopharm vaccine via COVAX.

As of Oct. 1, Nigeria had recorded 205,779 confirmed cases of COVID-19 and 2,721 deaths from the virus.

(Reporting By Libby George in Lagos and Camillus Eboh in Abuja, Editing by Nick Zieminski)



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