Neha Parikh, vice president and sector head – Financial Sector Ratings, ICRA, further said : “With higher growth, the market share of private insurers in terms of GDPI is likely to rise to 69% for FY2025 and 71% for FY2026 from 68% for FY2024. The health segment, which witnessed the strongest growth (accounting for 50% of incremental GDPI of Rs. 375 billion in FY2024), is likely to remain the key driver with the rising awareness of health insurance as well as increased ticket sizes.”
Mumbai:
Rating agency ICRA has said the capital requirement of the three PSUs, United India Insurance(UII), National Insurance Company(NIC), and Oriental Insurance Company(OIC) will be sizeable at Rs 94-102 billion to meet the solvency of 1.50x as of March 2025.
Neha Parikh, vice president and sector head – Financial Sector Ratings, ICRA, said, “ICRA estimates the capital requirement of the three PSUs (excluding New India) to be sizeable at Rs. 94-102 billion to meet the solvency of 1.50x as of March 2025, assuming the inclusion of 100 per cent forbearance on Fair Value Change Account ( FVCA) in the available solvency margin. Excluding this, the capital requirement would be higher at Rs. 320-328 billion.”
Solvency for the three PSU insurers (excluding New India) remains weak at negative 0.58 (excluding the fair value change account or FVCA on investments) as of December 2023 in relation to the regulatory requirement of 1.50x, resulting in sizeable capital requirement. Private players, however, remain comfortably capitalised to meet the
strong growth.
Parikh further said : “With higher growth, the market share of private insurers in terms of GDPI is likely to rise to 69% for FY2025 and 71% for FY2026 from 68% for FY2024. The health segment, which witnessed the strongest growth (accounting for 50% of incremental GDPI of Rs. 375 billion in FY2024), is likely to remain the key driver with the rising awareness of health insurance as well as increased ticket sizes.”
ICRA expects the general insurance industry’s GDPI to touch Rs. 3.7 trillion by FY2026, a robust 32% rise from Rs. 2.8 trillion in FY2024.
While the growth for private insurers’ is expected to remain strong, that of PSU insurers is likely to remain moderate because of the weak capital position. The profitability for private insurers is likely to improve supported by better underwriting performance. The combined ratio for PSU insurers, though expected to be lower, will remain weak, thereby impacting the net profitability.
The industry’s GDPI saw a robust 15.5% year-on-year (YoY) expansion in FY2024, rising to Rs. 2.79 trillion supported by the health segment. Apart from this, the growth in the motor segment was healthy, supported by the increase in the new vehicle sales (two-wheelers, or 2W, rose by 13.3% YoY and passenger vehicles, or PVs, by 8.4% YoY in FY2024).
The PSU insurers posted a small net profit in 9M FY2024 in contrast to the net losses in the previous years, driven by improvement in combined ratio (supported by the absence of the retrospective wage revision and payment of associated arrears in FY2024) and higher investment income.
ICRA expects the combined ratio for PSU insurers to remain weak, albeit improving, at 121% in FY2025 (122% (estimate) in FY2024).
With the high frequency and severity of natural catastrophic (NAT CAT) events in FY2024, the net loss ratio of the fire segment was impacted; however, considering the reinsurance and low retention in this segment, the impact on the overall net loss ratio of the industry was manageable, stated ICRA.
Profitability for private players remained strong supported by improved investment income, which is likely to continue. (combined ratio of 106% in FY2025 over 107% (estimate) in FY2024).