Citibank is one of the largest global banks and boasts of numerous connections all through the Asia-Pacific region. Two sources speaking to Reuters explained the possibility of the bank getting into a deal with an insurance firm over the next few months.
Citigroup Inc. is said to be gearing to receive bids from various insurance companies in a few days to allow these firms access to its fifteen million customers spread over twelve different markets.
Should the deal go through, such an insurance firm would be able to sell its general insurance policies to customers of Citigroup Inc. The covers that are included in the proposed deal are vehicle, travel and property insurance.
The deal would benefit both parties
A partnership between Citigroup Inc. and an insurance firm on non-life policies would benefit both parties.
For one, the bank would act as a sort of broker between consumers looking for general insurance coverage and the insurance firms searching for customers. Leveraging its network in such a manner would allow the bank to earn commission on any deals brokered between the two parties. As such, the deal would bring the bank a steady supplementary source of revenue with little exertion on its part. The estimated value of Citibank’s commission over the course of the proposed fifteen-year partnership is about 500 million US dollars.
Citigroup would also be able to upgrade its portfolio with such a deal. In 2013, Citi Inc. partnered with the insurer AIA to sell life insurance to its consumers over a number of years. A partnership with another firm would allow Citi to sell general insurance as well, thus complementing the deal it made several years ago.
Some of the insurance companies cited in this deal are AIG and the German-based insurer Allianz, though no confirmation has been given by either company of the deal. If one of these firms partners with Citi, that firm will gain a wealth of connections and consumers Asia. Asia is one of the regions where demand for insurance cover is increasing as more people can afford it.
Proposed condition for the deal
Insurance firms angling for a partnership with Citi Inc. will place their bids and Citi, in turn, will select a partner for the multiyear deal.
One of the sources told Reuters that Citi as of now is considering taking on a partner with a large enough capital base to cover all of Citi’s markets, from Hong Kong to India and even to China. Further explanation had the source clarify that this condition is not rigid and may be stretched between several firms.
Additionally, Citi will consider the upfront payment structure of each bidder, as well as the bank’s commission rates.
The partnership that Citi seeks is, however, not a new concept. In January of this year, Allianz, one of the insurers linked to the proposed Citibank deal, brokered a partnership with Standard Chartered Limited. The agreement between these parties allowed Allianz to penetrate into five Asian markets it had previously been unable to get into on its own.
