Hong Kong, Jul 20 (IANS): Reliance Life Insurance Company, India's largest in terms of policies sold, intends to sell strategic equity to a commercial bank and hopes to soon conclude a 26-percent equity sale to Japan's Nippon Life for $680 million.

"Life insurance is a highly distribution-oriented business and 'bankassurance' -- which combines the strengths of a commercial bank and an insurance firm on outreach -- is a significant contributor," said Malay Ghosh, president of Reliance Life.

"We have been approached by several banks. We are looking at all options for a strategic partnership. We will look at a large bank - one that will compliment our own network of 1,249 pan-India branches," Ghosh, also the firm's executive director, told IANS here.

"Offer of equity is an important component."

At present, the Insurance Development and Regulatory Authority of India (IRDA), the watchdog, does not permit a commercial bank to have more than one partner each in life, non-life and health insurance businesses.

An option now being pursued by the regulator is to allow two such tie-ups in each segment.

"We will seek a regulatory nod once the norms are revised. At the same time, the norms now do not disallow a commercial bank, already in tie-up with an existing insurance firm, to exit the arrangement and choose another partner," Ghosh said.

The senior Reliance official said Nippon Life is also open to their plan of inducting a commercial bank as a partner. The Japanese company had entered into a definitive pact to acquire a stake in Reliance Life in March, valuing it at $2.6 billion.

According to insurance industry sources, the top brass of Nippon Life, led by its senior managing director and head of international planning Takeshi Yuruichi, had met with the top brass of India's insurance regulator recently.

Reliance Life officials declined comment.

Speaking about the industry, Ghosh said commercial banks were contributing to some 20-30 percent of the life insurance business of private companies. In the case of SBI Life, an arm of the state-run State Bank of India, it is 41.6 percent and as high as 66 percent for HDFC Life.

Ghosh explained that since Reliance Life - a subsidiary of the listed financial services company Reliance Capital - was a late entrant in the business, it had few options to tie-up with a commercial bank and relied on building its own network.

"Now, we are realigning our strategy. The world over, insurance is 'sold' and not 'bought'. Therefore, the role of the intermediary - in this case a commercial bank - is of utmost importance to an insurance business," he said.

"Even for banks, it makes immense commercial sense. They are also very, very keen to go beyond the traditional distribution relationship and developing a more meaningful partnership."

Reliance Life, a part of the Reliance Group led by industrialist Anil Ambani, ranks first among Indian companies in the business in terms of policies sold and fourth in terms of new business premium.

The total funds under management amounted to $4 billion as on March 31, an increase of an impressive 31 percent over the year. The company hopes to turn into a profitable enterprise in the current financial year.