N Ramaswamy, CMD, GIC Re
The effort from the Regulator is to create a more conducive environment for doing business as well as to attract more players to set up shop in India. The Indian market is in a stage of big growth and it will need huge capital resources from investors as well as large capacities from reinsurers. There is a need for more commitment from all stakeholders
With India becoming the fastest growing economy in the world, what are growth prospects for the Indian insurance market going forward ?
Well, to the extent there is correlation between GDP growth and the insurance sector growth, the faster growth in GDP will certainly mirror in the insurance market growth momentum.
At the same time, additional growth can be expected from greater awareness and the steady rise in per capita levels as well as from the initiatives from the IRDAI (Bima Trinity and State Insurance Plan) and from the government – focus on greater infrastructural growth as well as increased government schemes.
In nominal terms, growth of about 12-14% year on year for the next few years is seen.
What will be its impact on the Indian reinsurance market? What kind of growth Ihe Indian reinsurance industry is witnessing ?What are sectors you think, India will be needing larger capacities? How GIC Re is getting ready for this?
The market will continue to be dominated by personal lines and any change in shift towards commercial lines will be gradual. To the extent personal lines need less reinsurance support,capacities may be required only for property, agriculture and specialty lines like aviation and cyber. Increase in Health and Motor will need to demand for pandemic and Catastrophic cover. There could be demand for parametric covers to take care of climate change related losses. With our solvency upwards of 3.0, we are in a position to cater to any market need for higher capacities in any of these areas.
Indian insurance market has also undergone larger regulatory transformation in recent times. What are some of the major developments on the regulatory front that will help industry growing faster with ease of doing business?
Yes. The regulator has revamped and consolidated the rules and regulations. Simultaneously, there is now transition attempted from rule based to principle based regime. Effort is also to facilitate business friendly environment. The Bima Trinity initiative as well as the State Insurance Plan are some measures that will help in the growth of the industry
How do you view the new reinsurance regulations bringing down the capital requirement for setting up business in India and asking Cross Boarder Reinsurers(CBRs) to keep collateral for doing business in India ? Will it bring in more reinsurance players to India?
The effort from the Regulator is to create a more conducive environment for doing business as well as to attract more players to set up shop in India. The Indian market is in a stage of big growth and it will need huge capital resources from investors as well as large capacities from reinsurers. There is a need for more commitment from all stakeholders.
Do you think Indian market, which is known for its large underwriting losses, is now maintaining underwriting discipline and will see further improvement from the profitability point of view?
While it would not be correct to say that the market is disciplined, because we do see pockets where there isserious underpricing and lack of discipline, but overall there are also corrections happening for some subclasses and segments. So, we remain optimistic about the market given its growth momentum and things should improve with implementation of IFRS and RBC.
Do you think Indian market is now needing insurance solutions beyond traditional products? What are emerging risks for Indian economy that needs more innovative products?
While non-traditional and innovative products can certainly assist the ecosystem and help policyholders with more choices, the issue of penetration is more basic and has to find its resolution in awareness, accessibility and affordability aspects. Products like surety might help address needs of the infrastructure industry, the vision of insurance for all by 2047 would need massive distribution push. With Bima Vistaar, we can make good progress and should achieve very significant success.
GIC Re has undergone massive restructuring in the last few years. Are you now in a better position to grow your topline, bottom line reduce your combined ratio, and provide higher capacity to the India and international markets? What are sectors you are bullish about in the Indian market?
Yes, indeed. We are in a better position from various aspects, whether it is price and rate adequacy, exposure management, rationalization of retrocession purchase, underwriting discipline, risk management and revamping internal processes and controls. This all should result in gradual improvement in combined ratio. With very significant increase in solvency ratio, we have the option of picking up business on a larger scale subject to our risk appetite and pricing expectations.
We have already started our growth journey in the Indian market, where we have diversified into retail health, where opportunities abound due to the high growth.
We are also working with Government and other agencies to develop solutions on
the Climate change front which is throwing up more frequent and severe losses across the country.
Are you expecting any rating upgrade this year? Will it help growing your international book? How are your international operations doing now? Which are the geographical areas where you would like increase your exposure going forward? Any new plans for your Lloyd’s syndicate?
With the various measures taken by us, we remain fairly optimistic about a rating upgrade. As I explained earlier, we have done a lot of good work in all areas of our operations and this is showing up in positive results.
A boost in our international credit rating will definitely help us access and write good quality business internationally. Growth in specific geographies will be a function of price and rate adequacy and quality of business in that market.
The Lloyds syndicate is doing well now and we hope to leverage the Lloyds expertise in other markets.
With so many Nat Cat events in India every year triggering large economic losses and but low insurance losses , what can be done tackle this from the insurance industry point of view? Do you think time has come for the larger use of parametric covers and even ILS for the Indian market? What kind of support you are looking from the the government on this?
Yes, the protection gap is indeed worrying and so I think it would be worthwhile looking at a countrywide parametric cover to manage the climate risk. Bima Vistaar, a product introduced by IRDAI, is exactly on those lines. GIC has also partnered with SBI Gen Ins Co. to give a state-wide parametric cover to Nagaland. ILS can also be tried but any meaningful contribution of ILS towards capacity provision is at least a few years away. We would need more granular and better catastrophe modelling adoption.
How do you see the global situation in view of the continued heightened geopolitical and climate risks, Cat losses and higher interest rates ? What are your expectation from the rate front in the next international renewals in Jan 1? Will it moderate or go up?
Market continues to present challenges in terms of risk exposures apart from the economic environment and market evolution is towards more nuanced and calibrated response from various players.
Rating environment will see more nuanced response from reinsurance community and risk carriers with better risk and exposure management will be rewarded.
Thus, rates may go up or down depending upon the quality of risk portfolio, underwriting management and exposure controls. But movement can be expected to be marginal from where the pricing adequacy at market level stands.
Do you think India’s first IFSC -Gift City is developing as a major re/insurance platform and global players can operate here as conformably as they operate in other IFSCs? What are your plans for GIFT City?
IFSC-Gift City should see more interest from the reinsurance community and the regulation would likely evolve to support the risk carrier ecosystem. We have an office in Gift City from where we write business from some territories and we would continue to grow in line with the growth potential of the underlying geographies.