The Best’s Market Segment Report, “Market Segment Outlook: India Non-Life Insurance,” notes that factored into the outlook revision are recent regulatory shifts that have allowed for increased and new investments in Indian insurers by multinational players and direct investments in insurers by private equity funds, as well as greater financial flexibility via improved access to debt and equity capital
Singapore:
International rating agency AM Best has revised its outlook on India’s non-life insurance segment to stable from negative, owing to robust growth potential, driven by economic development and rising insurance demand, and recent regulatory developments.
On the back of significant GDP growth, India’s non-life segment achieved a strong premium increase of 16.4% in fiscal year 2023, compared with a growth rate of 11.1% in the previous fiscal year, according to the General Insurance Council (GIC) of India.
The Best’s Market Segment Report, “Market Segment Outlook: India Non-Life Insurance,” notes that factored into the outlook revision are recent regulatory shifts that have allowed for increased and new investments in Indian insurers by multinational players and direct investments in insurers by private equity funds, as well as greater financial flexibility via improved access to debt and equity capital.
According to the report, insurers now have new options in issuing capital, including the issuance of preference shares and subordinated debt without first obtaining approval from the Insurance Regulatory and Development Authority of India (IRDAI). This change not only diminishes the level of regulatory overhead to access additional debt and equity capital, but also provides for faster fundraising to strengthen capital adequacy to meet liquidity needs if necessary.
Further growth in the non-life segment is likely to be supported by regulatory moves to speed up the product development process, increase insurance penetration and promote financial inclusion, all of which is part of the IRDAI’s vision of “Insurance for All” by 2047.
“With the process of getting new product offerings to market expedited, insurers will be able to more quickly capture niche segments,” said Chris Lim, associate director, AM Best.
“Companies also will be able to reprice products according to their loss experience more effectively and raise rates in a timely manner should loss experience be worse than expected,” Lim said.
At the same time, AM Best expects underwriting margins to remain constrained by excessive market competition, price inadequacy and increased reinsurance costs, although investment returns are likely to remain a strong contributor to overall earnings.
Poor underwriting performance in the segment’s two largest lines – health and motor – remains a drag on overall profitability. Health insurance claims have declined in the aftermath of the pandemic; however, loss experience has yet to recover to pre-pandemic levels.
Despite these negative pressures on India’s non-life market, recent trends underscore insurers’ ability to remain resilient and navigate through challenges, notwithstanding downside risks.