“Cross-ownership between the banks and the insurance companies is a very temporary situation. The next Supervisor of Insurance will see a very different state of affairs than the present one,” Supervisor of Insurance Eyal Ben-Chelouche said today. He was speaking at a seminar on trends in the insurance industry hosted by the College of Management academic program.
Ben-Chelouche added, “Today there’s a labyrinth of problematic connections, which indicates confusion. It’s hard to see the reason why Bank Leumi (TASE:LUMI) holds 20% of Migdal Insurance (TASE:MGDL), Bank Hapoalim (LSE:BKHD; TASE:POLI) owns 20% of Clal Insurance Enterprise Holdings (TASE:CLIS), and Israel Discount Bank (TASE:DSCT) owns 20% of Harel Insurance. At the same time, Eliahu Insurance holds 10% of Bank Leumi, and 29% of Union Bank of Israel. There’s a conflict of interest here, and a major failure in some cases. Insurance companies shouldn’t get involved in non-financial investments.”
Clal Insurance president and CEO Avigdor Kaplan, who attended the seminar, declined to respond to Ben-Chelouche’s remarks, saying that it was for the shareholders in his company and in Bank Hapoalim to respond.
Ben-Chelouche added that he would present the insurance sector’s strategic plan to the insurance companies and agencies in the coming weeks. He said the plan would include possible marketing of insurance policies by the banks.
Ben-Chelouche’s remarks drew an immediate negative response. Kaplan and Israel Phoenix general manager Bar-Kochva Ben-Gera decried the bank’s entry into insurance policy marketing. Ben-Chelouche answered that this was widely accepted in Europe. In Spain, for example, the banks marketed 71% of the insurance policies, and 58% in France.
”The entry of the older pension funds into the capital market will be gradual and cautious,” Ben-Chelouche remarked. “The regulations for the funds are very strict. At first, they will be permitted to invest only in highly-rated marketable bonds. This will nevertheless promote economic growth. Even after the pension reform, the pension funds will be the best pension savings plan on the market.”
Published by Globes [online] - www.globes.co.il - on June 29, 2003