Insurance Australia Group will invest A$170 million ($108 million) in a general insurance venture with State Bank of India, taking its first step into the fast growing Indian insurance market.

IAG said in a statement on Monday it will hold 26 per cent of the venture, with an option for 49 per cent in the future, and that the joint venture was expected to commence trading in 2009.

"India has a large and expanding economy, with a general insurance market predicted to grow 15-20 per cent per annum over the next 10 years," said Chief Executive Michael Wilkins.

The Indian insurance market is one of the fastest growing in the Asia region. IAG currently has operations in Thailand and Malaysia, and part of its strategy is to pursue selective growth in Malaysia, Thailand, India and China.

IAG and SBI signed a memorandum of understanding for a general insurance venture in May.

State Bank of India has over 100 million customers, a network of more than 11,000 branches, and access to an additional 46 million customers and 4,500 branches through its associate banks, IAG said in statement.

Its competitors in India will include a venture of India's Future Group and Italy's Generali, and one between India's Housing Development Finance Corp and Germany's Ergo.

IAG said it would fund the investment from internal resources.

The joint venture remains subject to regulatory approvals.