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.

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 ?

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.

AM Best has upgraded GIC Re’s ratings recently. With rating upgrade, you have got something you have been waiting for sometime. How it will be now translated into business proposition going forward?

AM Best’s recent upgrade of GIC Re’s ratings validates our commitment to strong underwriting practices, risk management, and financial stability.

During the period of rating downgrade, we prioritized a disciplined approach to underwriting, carefully selecting risks and implementing robust risk management measures. This has positioned us well to capitalize on the opportunities presented by the rating upgrade.

The upgraded rating will undoubtedly open doors to new opportunities. We intend to seize these opportunities while also reclaiming desirable business that was previously lost due to rating constraints. While we are optimistic about the future, we will maintain a cautious and disciplined approach to a diversified growth.

Which are the overseas markets you will increase your exposure and which segments?

Currently, our domestic and international business mix is approximately 70:30. Our goal is to gradually shift this ratio to 60:40 by increasing our international business. To achieve this, we will continue to review our portfolio, focusing on diversifying our geographic exposure and product offerings. This will enable us to capitalize on growth opportunities in the markets across the globe.

What is your focus on the Asia Pacific markets? How much of business you get from these markets and in what segments? Do you plan to increase it?

Focussing on the Asia Pacific market is a part of our international strategy. We will actively pursue opportunities across various segments, including property,casualty, and specialty lines. To enhance our presence in this dynamic market,we will leverage our branch in Malaysia which writes business emanating from ASEAN countries. This strategic location will enable us to better understand local market dynamics, build stronger relationships, and respond promptly to emerging opportunities. Additionally, we aim to regain lost ground in markets like Japan from our head office.

One common thread among Asia Pacific markets is under penetration and

rising Nat Cat Losses. Don’t you think these markets need much larger

capacities at affordable prices and innovative ways? How can it be done?

While the Asia Pacific region undoubtedly faces significant challenges from under penetration and rising natural catastrophe risks, I believe the primary issue lies not in a capacity crunch but rather in the need for innovative solutions. There also a need to leverage risk modelling techniques and possibly foster strong public-private partnerships.

Talking about the Indian market , it is currently facing serious issues of underpricing and indiscipline underwriting in some areas like fire and crop . How do you plan to manage this situation? Will you reduce your capacity from these segments going forward?

We are observing significant rate cuts in the market especially for medium to larger size risks. This is partly driven by a softening rating environment in the International Market for Industrial risks, but the main contributor is a high Domestic capacity. This is indeed concerning.

At GIC Re, we are committed to promoting sustainable and disciplined underwriting practices. We are continuously engaging with direct insurers to achieve pricing and terms that reflect the underlying risk.

We are closely monitoring the evolving market dynamics and will be taking all steps necessary to protect GIC Re’s interests. These measures would include enhanced risk assessment, collaboration with insurers and also prudent capacity allocation.

As a Market leader, our goal is to ensure that the Indian market remains

robust and resilient, while also safeguarding our financial stability and

profitability.

Also for the first time, the Indian general insurance markets have become overall profitable(led by GIC Re) though large underwriting losses and high combined losses persist. Do you think market’s overall conditions have improved and will mend further in the future?

It is critical to examine the underlying factors for the current situation before working out the future prospects. The persistent issue of large underwriting losses and high combined ratios underscores the need for sustainable underwriting practices.

To achieve this, the market must prioritize price adequacy. Sustainability will depend on the industry’s ability to address the fundamental challenges. By adopting sound underwriting principles, pricing strategies, and operational efficiencies, the Indian general insurance market can build a stronger foundation for future growth.

Monsoon is over in India. How is your Nat cat experience in the Indian markets? Will it have positive experience on GIC Re balance sheet and on primary market players and push prices down?

The monsoon season this year so far has been favourable in terms of natural

catastrophe loss activity. There have been increased CAT activity, but the

severity seems to be lower than earlier years. However, the overall result will

depend on monsoon in Southern India which will get most of its rains in

November and December.

Currently, the insurance market pricing is primarily driven by competition,

rather than natural catastrophe activity.

Do you think with new regulations requiring CBRs either to set up operations in India or keep collaterals for Indian business will be a game changer for Indian reinsurance market?

The new regulations requiring captive reinsurers (CBRs) to either establish operations in India or maintain collateral for Indian business will undoubtedly reshape the Indian reinsurance market. While there may be initial challenges during implementation, we anticipate a positive long-term impact.

GIC Re and other domestic reinsurers are likely to benefit from increased opportunities, while serious international players may consider setting up operations in India. This development aligns with the government’s “Make in India” initiative and could further strengthen the Indian reinsurance market.

You had said hydro power projects, after a few losses, are now high risk areas and may find difficult to get reinsurance cover in India going ahead. Why do you think so? Will the premium go up for the existing projects?

Hydro power projects are indeed high-risk as they are often located in regions prone to natural disasters. Further, the projects are getting complex and costly to repair.

Given the high-risk nature of hydro power projects, it is necessary to ensure that the pricing accurately reflects the risk involved and to maintain the financial viability of the re/insurance cover.

We have already implemented necessary measures for this segment to restrict certain coverages to manage peak loss scenarios. We expect other reinsurers also to follow suit.

You had mentioned GIC Re is 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. What are the plans and how soon the market will see concrete action plans in these segments?

Climate change is a critical issue that requires coordinated action. We are actively collaborating with direct insurance companies, the Government and various agencies to develop and implement solutions to mitigate the impact of climate change.

The market can expect to see concrete action plans being rolled out soon.

With robust solvency, positive rating and CBRs, who were providing cheaper cover under check, GIC Re is in an enviable position today. Will you go for a kill and what are your strategies on this?

Going for a kill would mean getting aggressive in the market. The lessons learned during the period of rating downgrade have reinforced the importance of prudent risk selection and robust risk management practices. We will not compromise on these principles, even as we pursue growth opportunities.

When you are adopting IFRS ? Do you have plans to shift to RBC also ? Will

it impact the way you do business and larger market?

GIC Re is in the process of implementing IFRS 17, which will significantly impact our financial reporting. While we are closely monitoring global regulatory developments as also the steps being taken by IRDAI in adoption of a risk-based capital framework, our current focus is on ensuring a smooth transition to IFRS 17.

We are confident that our strong financial position will undoubtedly aid us in navigating these changes and adapting to evolving regulatory requirements.