Swiss Re officials(L to R) Mahesh H Puttaiah, Head Group Economics & Sigma Research, Hadi Riachi, Market Head (India),Vineet Kumar, Head Cat Perils (APAC) at a press conference in Mumbai to release reinsurer’s report “India’s Economy & Insurance Outlook 2024” on Tuesday
Hadi Riachi, market head, India, said the reinsurer, which has set up a branch office in India for the last six years, is committed to the domestic market and is willing to provide as much capacity to support its economic growth
Mumbai:
Swiss Re, the second largest global reinsurer, expects India insurance sector to be fastest growing among G-20 with 7.1 per cent growth over 2024-28.
The domestic insurance sector is on course to log in over 7 per cent annual growth over the next decade and the premium income is likely to double to around USD 450 billion by financial year 2033-34, Swiss Re said in its report “India’s insurance market: growing fast, with ample scope to build resilience,” released on Tuesday.
The country continues to be exposed to many natural catastrophes including earthquakes, floods, tropical cyclones, drought and wildfires, with an average annual economic loss of USD 8 billion (inflation adjusted) over the last decade (2013-2022), informed the report.
However, insurance protection against natural catastrophe risks is low. Swiss Re’s resilience analysis indicates that 93 per cent of exposures in India are uninsured.
There is a significant natural catastrophe protection gap in India, but there are also many challenges to closing the gap. These include climate change effects, lack of awareness and low perception of risk, poor risk assessment for public sector infrastructure projects and underwriting challenges, said the report.
Hadi Riachi, market head, India said the reinsurer, which has set up a branch office in India for the last six years, is committed to the Indian market and is willing to provide as much capacity to support its economic growth.
According to the report, the total premium income in the Indian market will more than double over the next decade (2024-34) from the present USD 224 billion, and insurance penetration will increase from 3.8 per cent currently to 4.5 per cent by FY34.
The report further said over the next five years (2024-28), the total insurance premium income of domestic insurer are likely to grow 7.1 per cent annually in real terms, which is well above the global average growth of 2.4 per cent, 5.1 per cent in emerging markets and 1.7 per cent in advanced markets, the report said.
Managing the risks entail mitigation and also risk transfer solutions. While insurance can help cushion the financial losses, it is necessary to have physical risk mitigation structures in place in the first place, added the report.
Mahesh H Puttaiah, Head Group Economic & Sigma Research Bangalore, Swiss Re Institute, said,“India has made strong progress in developing the insurance sector and there remains significant potential for growth given the country’s low insurance penetration. India has also made good progress on risk mitigation measures for tropical cyclones, such setting up early warning systems.”
But there is a long way to go on this front for other hazards (eg, floods). The insurance industry has solutions to help individuals and companies to manage financial losses that result from natural catastrophes, while at the state level, re/insurance solutions can support governments in relief and rehabilitation work, in reinstating crucial services and in the rebuilding of public infrastructure, he suggested.
According to Puttaiah, the Chinese insurance market, which is now the second largest global insurance market, will see slow down in coming days in line with country’s ongoing economic deceleration.
The more than double of the global average growth of the Indian industry is on the back of a resilient domestic economy which will remain the fastest growing large GDP for the next five years, along with the rising awareness about the need for insurance and the very low penetration now along with the low insurance-to-GDP ratio of 3.3 per cent, which will also increase to 4.5 per cent, the report said.
Growth will continue to be led by life market which currently accounts for about three quarters of total insurance premium income at USD 163 billion and is forecast to grow at an annual average of 6.7 per cent during FY24-28, while non-life premium, including health, is expected to expand by an average of 8.3 per cent from USD 61 billion in FY24, the report said.
The report said if the Bhuj quake were to have happened now, the economic loss would have been USD 30-40 billion, as against USD 100 million then (given the larger size of the economy now) and the actual insured loss would have been USD 4 billion, as against USD 4 million then.