``Market conditions are very tough in the Indian general reinsurance business''
Gen Re, a member of the Berkshire Hathaway,run by its famous Warren Buffet, has kicked off its operations in India after receiving the final licence from Insurance Regulatory and Development Authority of India (IRDAI). Three of its functionaries- Winfried Heinen, Chairman of the Executive Board of Directors of General Reinsurance AG, Rainer Schurmann, managing director, Property & Casualty, Treaty Asia,Venkatesh N Chakravarty, chief executive officer, India, outline the reinsurer’s strategies for Indian market
Winfried Heinen, Chairman of the Executive Board of Directors of General Reinsurance AG
Finally you have a direct branch operation in India. How do you see the journey so far?
Establishing a reinsurance branch is an important milestone for us. We firmly believe in the great potential of the Indian market, especially for life and health insurance products,
We had opened a Representative office in 2008 and now we have set up a branch, effective from August 2017.We took it very positively that regulation has changed. For us thisis a preferred way to operate, i.e., from a branch.
The new branch structure will now allow Gen Re to deliver underwriting and risk management expertise locally rather than cross-border. It will facilitate an optimal business model, both efficient in process and highly beneficial to clients,
Gen Re has already been committed to the country's market for the past 15 years through various channels and the focus has been primarily on the life and health sector.
Gen Re will continue contributing and expanding in this segment while simultaneously exploring opportunities to grow its presence in the property/casualty reinsurance market.
Historically, I am from the life side and the life side, including the health segment, at this point in time, is the one that offers more opportunities. We are in the mortality and morbidity business. We also have people on the ground forP&C - property and casualty business
The market conditions are very tough in the general reinsurance business, We will be interested in focusing on our bottom line and not so much of our top line.
What kind of life and non-life business you done in India?
I think, right now it is 80per cent life and 20 per cent non-life. In India, we are predominantly a life reinsurer. This is mainly to do with a soft market that is seen in India in the general reinsurance market.
What is the capital you have brought in?
By law, we have to bring in $ 15 million (Rs 100 crore). and then we shall increase the capital as the size of the business grows. In my opinion, since we are a branch, the branch should not have capital of its own. A branch is part of a much bigger entity.
To grow more in India, we have to bring in more capital - which we cannot use anywhere else, and that makes it more expensive to do business in India.
This will be reflected in the prices we can offer to our clients,and probably this will again be reflected in the prices they offer to their clients. This inefficiency has a knock-on effect onthe customers.
How do you see the reinsurance regulations in India ?
We are glad that there is something now like a legal form of a branch that did not exista couple ofyears ago. But to be frank, there are still quite some hurdles that could be removed. I think I am not speaking on behalf of Gen Real one but for all international reinsurers.
Reinsurers do like open competition. The more we diversify, the better we can use our capital. Clearly there is a consensus in the international reinsurance market that minimum protectionism and low legal hurdles will benefit the market.
Rainer Schurmann, managing director, Property & Casualty, Treaty Asia
How do you see the P&C market in India ?
Prices are soft in the Indian general insurance market, and the market is burdened with underwriting losses. There is a soft market both on the primary side and on the reinsurance side as well.
As you know, reinsurers are going after commercial business and not the retail business in India . The retail business is profitable for insurance companies. Commercial business is a loss making one.
We do have growth expectations (in P&C), but from a very low base. But we have concrete expectations and discussions with clients to do more. We deal with both public and private sector insurers.
Will you grow P&C business faster than life?
Starting from a very low base, of course it is easier to achieve a higher percentage., So from that perspective, we may grow higher in percentage terms but that would be an unfair comparison.
What will be your focus - Commercial or retail?
Retail will barely gets reinsured. There are limited opportunities in retail. For a reinsurer, the natural demand is from the commercial side.
As far as the sectors in P&C are concerned, the demand is from Fire and Property lines. There is some demand from the engineering business. Marine business is rather limited in India. Liability business is interesting in India. There is a lot of sophistication, a lot of understanding of that class of business which is necessary - both on the primary side and on the reinsurance side - which is relatively limited in India.
Gen Re has a lot of experience on the liability side. This is an area where we can contribute to the growth of the Indian market.
Will Gen Re help Indian insurers to develop products?
On the general insurance side, the products are developed and offered to the market by the primary companies; as a reinsurer, we follow them and provide reinsurance for their products.
On the life side, we are activelysupporting the development ofhealth products for our clients..
Are you participating in the Indian Crop reinsurance programme?
The simple answer is not at present. We understand that crop is a big business in India and growing rapidly.It is a real big ticket item. At the same time, it takes a lot of very good understanding of the original business - which we still have to build up. Crop insurance is also an extremely volatile business.
There is already a lot of competition among reinsurers for this business. Globally, there are very limited areas where we do crop insurance and certainly not on our own.
Venkatesh N Chakravarty, chief executive officer, India,Gen Re
How do you want to expand your Indian business?
The new structure will enable us to provide technical and risk management services locally. Beyond classic reinsurance of traditional lines of business, the development of innovative life and health insurance products with and for our clients is at the core of our value proposition.
We are now ideally positioned to meet the demands and challenges of the market,Indian reinsurance regulations are evolving.IRDAI has formed a committeeto review the existing reinsurance regulations.This is most welcome.