Insurers turn to G-Secs, feel they are safer investment bet Companies feel govt bonds are safer as they are a liquid investment option

Insurance companies are shying away from the corporate bond market in a scenario where the Reserve Bank of India (RBI) surprised the market with a repo rate hike in the mid-quarter review of the monetary policy earlier this month. Insurance companies are primarily looking at government bonds as they are atleast a liquid investment option.

The street expects that the rate hike cycle may continue due to high inflation. Hence investing in government bonds will prove to be a safer bet.

“The yield of government bonds as well as corporate bonds rises when interest rates move up. But at least in case of government bonds insurers are safer,” said a corporate bond issue arranger. He also added that this trend of insurance companies shying away is expected to continue for few more months due to which even corporate bond issuances have dried up.

Nirakar Pradhan, Chief Investment Officer of Future Generali India Life Insurance said that corporate bond issuances are being deferred by companies due to the rising yields. However, he added that government securities’ rising yields have made the fixed income instruments attractive for both the insurers and customers.

Pradhan explained that while corporate bond issuances have been limited, in good papers like that of Rural Electrification Corporation (REC), the yields have touched 9.8%.

Since the time the Reserve Bank of India (RBI) tightened liquidity in mid-July, corporate bond issuances have dried up as the cost of borrowing rose. Issue arrangers are not expecting primary issuances of corporate bonds to pick up unless liquidity improves.

 

Source: Business Standard

Date:28th September 2013

Insurers may Get 2 Months to Comply with New Norms

Insurance regulator Irda is likely to give companies time until December 1 to align products in the ‘individual’ category with the sector’s new norms, according to a senior executive of an insurance firm. Earlier, the deadline was October 1. 
“Irda is looking to extend the deadline by two months,” the executive, who did not wish to be named, told ET. The decision has been taken to avoid a situation where companies are left with no products to sell, the executive added. A senior official of the Irda confirmed that such a plan is being actively considered. 
This is the second time the regulator would be giving in to lobbying by insurers. In June, it had given insurers a month’s extension to comply with norms for group products. 
Under Irda’s new rules, finalised in February, commission for all products will be linked to the premium-paying period and will vary between 15% and 35%. 
The maximum commission that can be paid to an agent has been set at 15% for the first year, 7.5% for the second and 5% for the third year. Commission will be lower for shorter term products. 
As per the new norms, all existing products have to be withdrawn from the market before October 1. Experts, however, are advising policy buyers to wait till the new regime kicks in. Although the insurance product will cost more under the new regime, buyers will benefit from features like guaranteed surrender value and higher cover in the event of death, they say. For instance, in the new structure if a person fails to pay premium after five terms, the policyholder will be eligible for a guaranteed surrender value of 30%, which would not be the case for an existing product. 
“The cost of the product goes up by 1-2%, but it gives benefits that are not available in the existing products,” said another senior executive of a life insurance company. 
Products will carry higher death cover for customers under 45 years of age—the cover will be 10 times the annual premium or 105% of all premiums paid as on the date of death, whichever is higher. At present, agents earn up to 35% commission on existing traditional products irrespective of the premium paying term. 
Another Extension 

• Under Irda’s new rules, commission for all products will be linked to the premiumpaying period 

• As per the new norms, all existing products have to be withdrawn from the market before October 1 

• Although the insurance product will cost more under the new regime, the policyholders will benefit

 

Source: The Economic Times

Date: 30th September 2013

Swiss Re for more involvement in India To hire 30-40 more staff in India in next few years

Global reinsurer Swiss Re hopes to partner with the central and state governments in health insurance.
Robert Burr, its head of life & health, Asia, said the health insurance gap in this continent was estimated to be $197 billion (Rs 12.2 lakh crore).
He said Swiss Re was exploring opportunities with state schemes. “Insurance should provide protection. It is a social obligation of governments to provide healthcare to citizens, around the world. We would look at mass market healthcare schemes and the emerging middle class who require better quality of care. There should be more partnerships between Swiss Re, governments, pharmaceutical companies and insurers. State governments are also looking for collaboration and we would like to partner with them,” he said.
For Swiss Re, the largest Asian market is Japan. The fastest growing ones are China, Indonesia and India. Burr said this would mean 30-40 more hires in this country over the next couple of years.
India has the Rashtriya Swasthya Bima Yojana as a central government-sponsored scheme. It was launched to provide health insurance coverage for below poverty line families. Beneficiaries are entitled to hospitalisation coverage up to Rs 30,000. They need to pay only Rs 30 as registration fee; the state government selects the insurer after competitive bids, it and the central government then paying the premium.
On reinsurance premium rates, Burr said on the non-life side, in the property and casualty segments, there was a lot of capacity; so, rates were flat or slightly down. On the medical side, he added, there were companies which tried to undercut. “In the reinsurance business, we can compete on price or on value. We (his company) don’t compete on price,” he said.
With respect to the areas of growth, he said that Swiss Re will expand in the insurance segments of life, health, agriculture, natural catastrophe and infrastructure. “We are interested in the medical insurance space and in long-term risks. Here in India, the tenure of products is 3-5 years and is short-term in nature. We like products that have duration of 10 years and more,” he said.
Swiss Re is also looking forward to getting a reinsurance branch license in India, since the insurance regulations do not permit them to do so presently. Robert Burr said that they are committed to investing in India and added that de-regulation of the reinsurance market would enable them to hire more people. While the global reinsurer is also engaged in a prospective health insurance joint venture with a large Indian corporate, Burr clarified that whatever  investments Swiss Re does in any company or JV, it is passive in nature.
“We invest in countries to stay and don’t hit and run. The regulator has his concerns, with respect to flight of capital. First, let the capital in and then regulate it. If we get a branch license, people can come here and we can increase a bigger pie for everyone. It is good for the industry,” he said.
India, which is one of the fastest growing markets for Swiss Re in India, contributed 10 per cent of profits for their life and health business in Asia in this year.

Source: Business Standard

Date: 25th September 2013

Maruti Suzuki Kickstarts ‘Umbrella Mentoring’

The country’s largest carmaker, Maruti Suzuki, has embarked upon a structured programme called “umbrella mentoring”, aimed at developing mentors within the organisation who can grow a long-term relationship with employees. Though mentoring is not new to the organisation, this is the first time it is being taken up in a structured way in line with the company’s business expansion plans. As the name suggests, ‘umbrella mentoring’ is aimed at touching a large number of employees. It covers managerial staff across levels as well as shop floor workers. 
The programme is aimed at giving employees across levels and functions such exposure early in their careers. Besides, it looks to help the employees prepare themselves for bigger roles in the organisation and to make them feel responsible towards the growth of their mentees. 
“In our industry, where high growth is often interspersed with periods of low or moderate growth, mentors play the magical role of counselling young mentees,” says SY Siddiqui, chief operating officer – administration at the company. The mentors guide them to swim through the slowdown and prepare them for the turnaround with regular and open communication, he adds. 
The concept has been introduced to help employees in bonding seamlessly across locations, which will also help the company prepare people for leadership roles. Maruti Suzuki’s marketing team operates through 34 offices, including 17 regional offices and 17 area offices, in addition to plants at Gurgaon and Manesar. The company may soon start their new research and development facility at Rohtak in a phased manner. 
Explaining the specific significance of such an initiative in a prolonged recessionary environment, Siddiqui says: “Mentoring in such cases is about managing expectations while still preparing for the turnaround.” 
It helps with introspection on “how we can improve ourselves, enhance our productivity so that we are better equipped to face the good times,” he adds. The programme will provide a platform for mentors to enhance their leadership competencies and help build an open work culture where people are respected and cohesively aligned with organisational objectives with swift two-way communication channels, says Siddiqui. 
Each mentor has been assigned four to five mentees. Mentors undergo training. Some of the competencies considered while training mentors include communication, influencing, conflict resolution, and problem solving, decision making, team bonding. Training for mentees covers responsibility, optimisation, alignment, dedication, motivation, attitude, passion. The trainers deploy a combination of games and activities, video clips, discussions and role plays, self introspection, case studies. The company is also offering specialised trainings to the aspiring mentors and mentees. At each level, competencies have been defined and trainers have designed content on the basis of the competencies. 

Source: The Economic Times

Date: 24th September 2013

Private refiners to get special insurance cover

The government has decided to extend to private refiners the special insurance cover it provides to state-run companies that import crude oil from Iran, a measure it hopes will increase imports from the country and thereby help save foreign exchange.

The measures is part of the plan outlined recently by oil minister Veerappa Moily to the Prime Minister to cut India’s oil import bill by $20 billion.

High oil and gold imports are seen as the primary cause of India’s record high current account deficit that has contributed significantly to the rapid rupee depreciation.

Higher crude imports from Iran can help save precious foreign exchange as India can pay for part of the purchases in rupees according to an the arrangement worked out between the two countries after US & EU led sanctions on Iran made it difficult for New Delhi to settle payments in dollars through foreign banks.

India wants to import of 13 million tonnes of crude oil from Iran in the current financial year, but oil firms could import only 2 million tonnes of Iranian crude in first five months of current fiscal year mainly because of insurance problems.

Indian general insurance companies provide cover to oil refineries and then re-insure that risk with global re-insurers by paying a premium thus reducing the risk on their books.

But after sanctions against Iran, global insurers provide re-insurance to crude shipments from the country with a “sanction clause,” which limits the amount they would pay should a claim arise.

This has forced the government to set up a special pool to provide insurance cover to ships ferrying Iranian crude.

This “Energy Insurance Pool” set up to facilitate insurance cover for crude buys from Iran was meant primarily for PSU oil firms. It is administered by a governing body comprising bureaucrats of oil and finance ministries.

“The cover to the special pool will now be available to other domestic petroleum companies if they wish to be a part of the pool,” a government official told ET. Insurance to private operators will be provided through the state-run General Insurance Corporation.

The proposed pool will kick off with Rs 1,000 crore contribution from the Oil Industry Development Board (OIDB) and similar amount will be jointly contributed by state run general insurers and GIC. “The first 500 crore from OIDB will come immediately and the rest will flow in by April 2014,” another official said.

Under the arrangement, all premiums paid by the companies will be credited into the pool and so will be the interest earned on the corpus. “This will enable the pool to grow and make it a more robust mechanism,” the official said. The finance ministry had proposed to relax Section 25 of the GIBNA Act 1972 to facilitate this pool and permit private sector participation.

However, the pool size will be too small if India is looking to raise its oil imports from Iran, a senior GIC executive said. “As of now the fund is very small. So, from that point it is better if more companies join but what is paramount that OIDB releases the full amount so the process can be kick started at the earliest,” the official said, requesting anonymity.

Source: The Economic Times
Date: 23rd September 2013

TA L E N T D I A R I E S Workplace friendships: It’s complicated IT IS BEST TO EXERCISE CAUTION WHEN IT COMES TO MAKING ‘FRIENDS’ AT WORK, SAYS MARK DIXON

There’s no doubt about it  – if you have good friends at work, you’re more likely to enjoy your day at the office. Someone to sit with at lunch, discuss the gossip, empathize over difficult customers – these things oil the wheels of the working day. 
 Or do they? Whereas some management experts think friendships and socialization at the workplace boost productivity and staff retention, others think they can create problems for both individuals and businesses. 

 DO FRIENDSHIPS CREATE CONFLICT? 
So are workplace friendships a good thing? Well, it’s not quite so simple. Other researchers point to their possible illeffects: people being distracted from work due to socializing; breaches of confidentiality; blurring of boundaries between friendship and work roles; favouritism; clash of roles (eg: managers finding it difficult to enforce procedures with their friends); bullying or poor performance being overlooked or condoned and cliques forming. But actually, many of those ‘dangers’ are more a result of poor management cultures than friendships per se. 
 TRY THE COMMON-SENSE APPROACH 
Whether or not you think work friendships are good for business, they’re going to happen anyway. In India, 78 per cent of workers meet with colleagues outside of work (higher than the global average of 64 per cent), and 88 per cent have close friendships with colleagues (again, higher than the global average of 71 per cent).  So rather than debate the theoretical pros and cons of workplace friendship, it is better to make sure it helps, not hinders workplace performance in practice. Business owners and managers have a part to play here: Use team-building activities to extend the interaction in your workplace. Team-building can increase the number of people who talk to each other, and prevent cliques and exclusion; 
Reward people according to performance and output, not time spent at the desk. That might deter them from chatting with their mates for hours each afternoon;
Beware of strong friendships (or office romances) developing between direct reports and line managers. Support managers in resisting the pressure to give preferential treatment to their friends. It may be worthwhile reconfiguring teams to avoid this situation; 
Relook at the functioning’s. People who do their jobs at locations like business centres and lounges get all the buzz of a professional workplace without having to be in the same place as their colleagues. Letting them work at different locations can take them out of a rut in terms of their working methods and habits. 
ONE WORD OF WARNING: If your new self-avowed ‘Best Friend Forever’ at a business centre turns out to work for your main competitor, be careful about what you say about work or just find someone else to have coffee with, in that case. 

 

Source: Ascent

Date: 11th September 2013

 

Employees Brace for a Dip in Year-End Variable Pay FMCG, manufacturing may pay out less variable; Pharma, oil and gas employees may not see a significantly large dip in variable

 Employees across sectors are keeping their fingers crossed on the year-end variable pay in an uncertain economic scenario. “It is still early to say, but sentiments right now are negative and if this continues, companies will review their forecasts. But then they also need to retain talent,” says Thiruvengadam P, senior director, human capital advisory, Deloitte in India. 
Even so, companies are not sending out warning signals yet. “Philips India is on track,” says human resources and global chief learning officer Yashwant Mahadik, adding that variable pay for 2014 may take a hit at FMCG firms if the economy continues this way. Deferments, too, are largely ruled out but consulting companies and a few professional services firms may look at payments in tranches. 
Employees in relatively better-performing sectors like pharmaceuticals and oil and gas will not take a huge hit. Manufacturing and service sectors, however, could see a smaller percentage of variable pay than the comparable period last year. The HSBC/Markit purchasing managers index for India’s manufacturing industry contracted for the first time in over four-and-a-half years to 48.5 in August. 
Expectations with which companies had started this year have changed. “The first half is over and one should not expect a high variable pay this time,” says Anandorup Ghose, practice head for executive compensation and corporate governance at Aon Hewitt. 
The biggest issue organisations are dealing with is uncertainty, and to an extent this has been factored in while setting targets and budgets. Therefore, those who have variable plans linked to performance against goals should not see a big difference, at least in junior and middle management, says Padmaja Alaganandan, executive director at PwC. 
“Slower fixed pay increase and a larger share of the upside through variable pay will continue, which means at senior levels, alignment with business financial performance will strengthen,” she says. In the case of operational incentives including sales incentives, there could be more swings depending on geography or business-specific performance, adds Alaganandan. 
At the same time, a sharper focus on the employee’s report card is guaranteed,says Nishchae Suri, head of people and change practice for KPMG India. Suri says goals for next year will get stretched and for those who will give out bonuses, the bell curve will be more accentuated. Therefore, a top performer will get twice the bonus of the averagerated employee. 
For a professional services companies like Towers Watson, bonuses are “self-funded”, depending mostly on the employee’s performance and not on an overall budget. “This year, variable payouts will be hit, with most companies (around 60%) paying less than target (roughly between 50% and 70%). The rest may not make any payouts,” says Subeer Bakshi, director, talent and rewards, Towers Watson India. 
According to Aon Hewitt, variable pay is typically 22% of compensation for the top management, 16% for the middle order and 12% to 13% for the foot soldiers. A recent Deloitte study on compensation trends in 2013 stated that across industries, variable pay is 17.3% of one’s cost to company, after an increase of 1.3% points in 2013 over last year. This means, a larger chunk of salary is dependent on the overall economy. The financial sector, for one, has the largest component of variable pay and its employees are now likely to take the hardest hit. 
Employees on their part are prepared for a lower variable pay this year-end. Prakhar S (name changed), a middle manager in the sales team at a Mumbai-based telecommunication firm, says he will have to re-think his plans to buy a car. He earns Rs 15 lakh a year, of which Rs 2 lakh is bonus. “Every month, I try to save up to Rs 30,000 and planned to make the down payment with my variable pay. But I do not see that happening now”. However, his company has not sent its employees any communication on the issue. 
Firms have queued up before compensation experts to understand the impact of lesser variable pay on retention, deferments and how to make performance metrics sharper. “More companies are coming for help this year than in 2008-2009, because that downturn was sudden for many. But this one has been progressive over one year,” says Ghose. 

Source: The Economic Times

Date: 6th September 2013