Growing its business fast, Munich Re, the largest global reinsurer,has emerged as one of the key Foreign Reinsurance Branche(FRB) in India. Hitesh Kotak, Chief Executive, India, Middle East and Africa, Munich Re,in an interview with Asia Insurance Post, outlines his plans for the country
Edited Excerpts:
How do you see the growth and developments in the Indian re/insurance market?
India’s primary insurance market is rebounding post 2 years of Covid. The economy as a whole, infrastructure, manufacturing and public consumption is growing.
The Covid pushed Health insurance awareness and it has become the largest line of business and now with supply of semi-conductors stabilising, the vehicle deliveries are picking up and so does the motor insurance. Agriculture insurance remains a strong line of business critical for growth of Indian economy.
The fast growing Indian economy is exposed to the complexity of new age industries, the technological changes, the growing penetration of internet and digitisation trends bring along with it cyber threats, the climate changes and increasing trend of natural catastrophes and needs a strong and robust insurance and reinsurance sector.
The insurance regulator is playing a proactive role in developing the sector in India, bringing in changes in regulations like product filing supporting innovation in market and working towards ease of business.
Do you think Indian markets holds a lot of promise for global reinsurers like you and why ?
Indian economy is growing at a fast pace. The insurance penetration is still much lower than the developed economies. Global reinsurers like Munich Re look for markets with stable regulatory and economic environment along with a strong insurance market potential.
Munich Re is committed to support Indian insurance industry; to bring in new products and solutions to the market. We leverage on our global expertise and financial strength to support the fast-growing market needs.
Munich Re is aligned to the vision of the Indian Government and has brought products like Solar panel performance warranty to support renewable energy, Battery performance warranty for Electric vehicles, Crop Insurance leveraging technology solutions and Cyber Insurance to safeguard the Indian services and manufacturing sector.
We have also launched Parametric driven insurance solution for the small borrowers, to fill the gap in a traditional insurance solution. This addresses the bottom most section of the Pyramid.
On other hand, we work with some of the largest ecommerce players offering solution for the young, tech savvy digital India. We are excited to see such wide range of opportunities, and our endeavour is to bring in solutions for the ever-evolving risk landscape.
What are your plans for the Indian market? How is your experience in the last four years you are operating in the Indian market? Do you plans to bring in more capital to India?
Indian economy is growing strong and has a sustained momentum and insurance has replicated this success story. Due to large market size which is under penetrated, there is opportunity not only in commercial insurance but in retail segment as well.
We have a very positive growth outlook for India, and are committed to stay continuously invested. We were the first FRB to open its branch and dedicating capital here. Since then there has been a constant growth, not only in business but in our commitment of hiring more people locally, setting up an office and expanding it, empowering our India team more and more who understand this market.
Going ahead, will you more focus on topline or bottomline? When do you think you plan to breakeven?
We focus on supporting the growth of insurance in India. As the insurance penetration increases, topline would grow. As an organisation, we need to be disciplined and resilient on bottomline to sustain for long term.
What are the areas of business you have focussed in India?
We have a very balanced book with presence across all line of businesses. We have a strong presence across all segments including Property, Casualty, Crop, Life and Health. Munich Re will continue to support all industry requirements, be it on large complex engineering risks to a solar panel.
One area we would like to work with the industry and the government together is around disaster risk transfer solution. India is growing fast, and NatCat disasters push back the economy by few years, if not decades. It is important that economic impact can be addressed through well-developed insurance solutions and the government’s resources are used for development goals.
We are working on solutions that are important today and will be instrumental to address issues that could be critical tomorrow. One such example is cyber insurance, that we developed for Indian corporates and individuals.
We not only created the product proposition, but we also worked on the entire ecosystem; working closely with insurers, cyber experts, incidence management teams to offer a complete solution.
We also worked with the corporates and educated them on the vulnerabilities they have in their systems and how they can address them. This has positioned us as one of the leading cyber reinsurers in Indian market.
There is a perception that Indian market is not getting proper reinsurance support of late as both GIC Re and FRBs are getting more bottomline focussed. That is the reason why a lot of business are being placed outside India. Would you comment on this?
Insurance industry like any industry, and in fact more than any other industry, should be financially prudent and sustainability is of utmost importance. If an insurer or a reinsurer makes losses and is not solvent, it can have cascading effects on the economy and impact the interests of its policy holders/customers.
I do not agree with the observation that a lot of business is being placed outside India. If you look at the public disclosure figures, close to 77% business is placed domestically in India.
What are the innovative deals you have done in the Indian market?
We have launched quite a few innovative products in the market. Recently we launched Battery performance warranty for Electric Vehicles. This is a unique product extending the manufacturer’s warranty providing support to the EV user. This product will be critical for growth of the Indian EV market, and we are proud that we are the first ones to be launching this.
Another first for us was parametric driven NatCat cover for the small borrowers. The traditional property products needed cumbersome process of claims intimation, survey, assessment of loss and then payment, which could have taken weeks to months depending on the availability of adequate data and proofs.
We worked with the insurers and launched product that pays if the event happens and the trigger is met. This expedites the payout and the small borrowers receives money in real time of need.
What kind of business and innovative deals you have done in the areas of non-conventional energy and Cyber insurance?
Solar Photo Voltaic Performance Warranty: We are working with almost all key PV manufacturers and covered 43% of the new Installed capacity in India 2021. This is a major achievement for a product which is just few years old. It shows the ability of Munich Re and the trust that our clients have put in us.
Cyber Insurance: We have not only offered cyber insurance covers for large corporates, we have also been able to simplify and bring it to the individuals. Our experts have worked extensively to refine our offering in the market including the claims management support. With India now moving in to the 5G era, and every Indian getting on to the digital platform, we believe that Cyber insurance is going to be one of the largest product in personal line segment.
What are the other product innovative products you plan to bring in to the Indian market?
We will continue to work on the theme of sustainable product and solutions for the long term goals of the economy. We are testing quite a few solutions in other markets and would like to introduce sometime soon in India. These solutions include
Do you make use of brokers in placing deals in India?
Brokers are important part of the insurance and reinsurance industry. We work with all stakeholders in the industry along with the brokers.
Is your India office doing reinsurance business from neighbouring countries and do you have plans for expanding them? What are these countries?
We work with insurers and reinsurers from Sri Lanka, Bangladesh, Nepal, Bhutan, and Maldives.
How to develop a reinsurance Hub in India?
As insurance and reinsurance are capital intensive businesses, one needs legal and taxation system that is conducive to growth, allowing them to deploy capital efficiently and be at par with other reinsurance hubs.
It is important for us to benchmark our capital related provisions and tax provisions to few of the successful RI hubs if not all.
Currently, we do have some significant path to cover in this regards. Regulator has already embarked on the journey of simplifying the regulations and aid the ease of doing business. It has taken feedback from the industry and now we await implementation of those suggestions.
Another key area India needs to invest is on the Talent development. Today insurance industry, including reinsurers, are struggling to get skilled manpower. This sector is critical for economy and needs continuous supply of technically sound manpower.
As an industry, we need to invest in the right education and relevant training programs and attract youngsters to this industry.