``Our strategy is to increase footprint in the developed economies while maintaining and growing market share in our part of the world''
In an exclsusive interview with Asia Insurance Post,Reena Bhatnagar,General Manager and Joint Charge of CMD, GIC Re, speaks about listed reinsurer's strategies to expand its global foot print and to make the listed company a tech-savvy and profitable entity
Which are the segments of business where GIC Re is seeking leadership globally?
GIC Re has emerged as a major regional reinsurer and aspires to grow into a major global reinsurer. This is on account of our higher share of domestic reinsurance business at about 70% of our premium volume. With our various steps for expansion globally in terms of Lloyd’s platform and imminent operationalization of Russian subsidiary, we expect to improve our global presence.
We are Asia-Africa heavy and we expect that to continue.This is in large measure owing to these regions growing at a healthy rate.We write business across all classes.
What kind of business you are doing from the Asian regions?What are your future plans for the region ?
We are writing across all classes of reinsurance.Asia will continue to be the growth driver for the sector and China and India will contribute to the growth in a major way.We expect to maintain our market share in the continent and grow in a measured way.
Our strategy is to increase footprint in the developed economies while maintaining and growing market share in our part of the world.
Do you expect alternate capital soon play an important role in Asian markets?
Actually alternative capital need not play an important direct role in the Asian markets.Since capital is fluid and can cause a domino effect, any impact elsewhere will lead to transfer of capital to other regions. As this capital has come in a major way in developed economies, global impact of its functioning is felt across the sector.
Talking of the direct role that it can play, it is already playing a role in Japan for perils such as earthquake and typhoon. As we move towards better data quality and more advanced modelling methodologies for Asian exposures, this capital will certainly play a growing role.
But with record catastrophe losses in 2017 and 2018, there is some pause in their accessing of reinsurance markets.
What are the sectors,you think,will lead the growth in the Indian general re/insurance industry going forward?
Health,Motor and Agri are the three major segments and can be expected to continue to dominate the market for the foreseeable future.
Other classes such as personal accident(PA),liability and other miscellaneous can be expected to show robust growth but on a smaller base. Liability premium has grown almost threefold over last decade. There is certainly a pick up in demand for liability products.
Do you have plans to raise pricing in other segments after raising it in eight segments in the Indian market?
Technically speaking, GIC Re did not raise the prices. We only advised the insurers that unless they follow the regulator circular, i.e. Insurance Information Bureau (I.I.B.) rates, which was followed more in breach, they cannot cede risks to treaties supported by us. They were, and are free to price the way they like as long as they do not use the GIC Re capacity by way of reinsurance.
If they want to use the GIC Re capacity, they need to follow regulatory circular which is underpinned by technical rates compiled by Insurance Information Bureau, an industry body under the regulator.
We are closely monitoring the profitability across segments and will take decisions as warranted.
Do you think, with so much of natural disasters in India, the time has come for a mandatory Cat product and Nat Cat Pool?
Each geography and country has its own catastrophe risk profile. Quite possibly, the change in media coverage is creating this impression.
But we in the reinsurance sector have always kept track of occurrence of catastrophe events whether in India or outside.
Given the size of the Indian continent, which has a huge land mass bigger than quite a few countries, the incidence of catastrophe cannot be said to be unduly high (the last couple of years may be taken as an exception).
Mandatory cat product is a good idea but its implementation may present a challenge.Unless there is state intervention and subvention, it appears a difficult proposition.This is largely so since our economy has a great deal of informal component.We need to wait for the risk awareness to develop so that any such solution, e.g. a pool, has a viable scale.
Having said that, maybe it is the right time for the industry to start debating the prosand cons of forming an Indian NAT CAT Pool.
Do you think general insurers and GIC Re are losing interest for doing Crop insurance because of higher claims?
I am surprised at your question.I believe that with about three years of experience, the market has learnt its lessons in pricing, claims management, infrastructure and overall risk assessment as well.
Crop insurance today is on a firmer footing than it was when the scheme was introduced.GIC Re’s Agri book continuous to grow, though it has marginally reduced its market share to bring more balance in its overall risk portfolio.The market is geared to service the crop insurance for the country quite effectively. Some of the insurers have changed their approach and calibrated their strategy.
GIC Re is planning to make use of analytics and robotics for its business. Would you elaborate on this?What are the lines of business where you are planning use robotics?
As a reinsurer, we have little direct involvement in client servicing and claims handling on the insurance side. That said, we are in the first phase of running a pilot for deployment of new technological possibilities, including robotics, in our process improvements.
This would be aimed at supplementing our Enterprise Risk Planning platform and should feed into it.
Do you think Insurtech can play an important role in the growth of businessof GIC Re and Indian insurance industry?
Insurtech may be presently seen as an alternative to established way of business but it is a matter of time before it becomes the norm. It has implications across the entire value chain of risk management industry and thus, will certainly play a pivotal role going forward.
How the GIC Re is getting ready to support a $ 5 trillion Indian economy in matter of few years?
GIC Re has serviced the Indian market for almost half a century now. It continues to dominate the Indian reinsurance market space and expects to maintain its competitive position.
Our support of the Pradhan Mantri Fasal Bima Yojana is a case in point where GIC Re ably supported the scheme with market share of over 50% for a couple of years which has lent a great deal of stability to the market.
We are geared to provide similar support to the Pradhan Mantri Health Scheme as required by the insurers. With a talent pool and market experience of almost half a century, together with long built relationships, we are in a position to support the market in every way possible.
We should be able to grow largely without raising any additional capital but now having been in listed on the bourses, we have the additional source of capital to tap, should the need arise.
How do you want to make GIC Re more profitable?
Our domestic book constitutes about 70% of our total risk portfolio with foreign book making the balance 30%. We are integrating technical risk assessment and modelling inputs in our decision making. You have already witnessed the steps taken by the Corporation in March 2019 towards some of the segments of fire class in terms of putting pricing on sound technical bases which will have a positive impact on profitability.
What are your plans for your UK operations after Brexit?
The UK branch writes business from Europe, Caribbean and parts of Latin America. Brexit would impact, if at all, the European business. We are keenly watching the developments in regard to Brexit, which has been hanging fire for a long time. However, the impact of the way Brexit goes will have more impact on insurance than reinsurance.
We are constantly engaging with our European clients and are confident about continuing business relationships, irrespective of the Brexit outcome. In fact, we could possibly benefit from the realignment that will be thrown up.
How is your Syndicate at Lloyds’doing?What are the targets for 2019-20 and what lines of business you are doing here?
The syndicate at Lloyds is still in a start-up phase. Year 2019 would be its first full year of operations and it is expected to complete around GBP 70 million of premium.
For the current year, the syndicate predominantly writes Property Business. It also writes a small share of specialtybusiness - marine and terror. For year 2020, it is planned to add Motor and Liability business.
With the presence 10 global reinsurers along with GIC Re in India, do you think, Indian insurance industry benefitted in terms of capacity and innovative products?
Actually, these reinsurers have been historically active in the Indian market from their regional offices or headquarters. Thus, to attribute any change to their presence in India by way of a branch may not be quite correct.
Reinsurance is an international business where risk management takes a global scale and there is exchange of practices and knowhow. As the Indian market integrates with global industry standards, benchmarking and transfer of best practices do take place.
Do you think with the presence of 10 global reinsurers and IFSC like GIFT City,India is heading towards to be a reinsurance hub in the next few years?
While presence of global reinsurance majors is a welcome step and setting up of GIFT City is certainly a step in the right direction, creation of a reinsurance hub will almost necessitate all the requirements of a commercial hub.
The infrastructure has to be at par with other major global centresto attract global capital, talent and business. This will require progress in the sphere of urban infrastructure, financial systems and equally importantly the legal infrastructure.
We are already moving in this direction and will have a thriving (re)insurance hub which will cater to the region.