This is for the first time that a co-operative is entering insurance in thecountry after the opening up of the sector to private players. Iffco willhold 74 per cent in the Rs 100-crore company while the rest will be held byTokio Marine. The memorandum of understanding will be signed on Monday.The joint venture will undertake a range of non-life business includingfire, marine, rural.

According to sources in the industry, Tokio Marine chose to join hands withIffco which has nothing do with the financial sector as it has strongnetwork as well as the capital.

"It is very important to maintain a sound solvency position over a period oftime in non-life business," sources said.

Tokio Marine was the largest non-life company in Japan before Mitsui Marineand Sumitomo decided to merge to form the largest company in the country. Ithas a 18 per cent share in Japanese market.

The entry of big player like Iffco-Tokio Marine will generate intensecompetition in the domestic non-life insurance market. Already big playerslike Axa, the largest insurance company in the World, Allianz which has atie-up with Alpic, American International Group which has joined hands withTatas, CGU with collaboration with Bombay Dying, Royal & Sun Alliance withSundaram Finance, Reliance have announced their plans to enter non-lifeinsurance.

Though the number of life insurance players will be more than the non-lifeplayers in the country, still it may not be smooth ride for the players asexisting companies are finding it tough to expand business. That too all theexisting state companies are incurring underwriting losses and living oninvestment income for quite a long time.

The industry does not expect a relief from the underwriting losses in nearfuture. However the optimism of new players lies in the fact that India'snon-life penetration is pegged at 0.6 per cent of the gross domesticproduct. Iffco has already recorded the highest-ever production of 28.87lakh tonnes of Urea.

Iffco with a turnover of Rs 4700 crore has over 35,000 cooperatives as itsmembers. It distributes 70 per cent of the country's urea necessity.