GIC Re and Foreign Reinsurance Branches (FRBs) and IIO reinsurers in GIFT-IFSC came in strong support of the market at Apr 1 renewals

“Yes, we did write more business than last year. Generally, we found the market to be soft with rates either below or same as expiring. Reinsurers are watching to see whether primary insurers are maintaining price adequacy, especially in property class of business. We did not see any disruption in the market due to the recent collateral imposed on CBRs. We believe most CBRs are currently ok with the premium withheld option’’ N Ramaswamy, CMD GIC Re

Mumbai: Cheering India Inc and setting aside all speculations about a possible disrupted domestic reinsurance market, Rs 3 trillion(around $37 billion) Indian general insurance industry is now ready for Apr 1 renewals with soft pricing, abundant capacity for all lines of business and above all still maintaining market discipline amidst cut throat competition among players to grow their business.

With the beginning of the new fiscal – FY 2025-26 – from today, Indian general insurers, and re/insurance brokers have been intensely preparing themselves over the last few weeks to strike deals generating over Rs 1lakh crore($11 billion) premium by renewing their clients’ annual accounts with various categories of reinsurers including state owned GIC Re, a dozen of foreign reinsurance branches in India, set up by global multinationals and around 300 overseas reinsurers which are registered as cross border reinsurers (CBRs) with Hyderabad based regulator IRDAI.

Moreover, this is also the first time that a couple of new class of reinsurers -International Financial Service Centre Insurance Office’ (IIO) at the Gujarat International Finance Tec-City International Financial Services Centre (GIFT IFSC), who were earlier operating as cross border reinsurers for the Indian market, are transacting Indian business in US Dollars, after being licensed by India’s unified regulator International Financial Services Centre Authority (IFSCA).

But, what had confused the market is a new norm- Cross Boarder Reinsurance Regulations unveiled by the IRDAI – which among other things had made it mandatory from Apr 1 for any overseas reinsurers, except who are reinsuring Crop and various Government Insurance Schemes, receiving over Rs 70 crore of premium from any Indian general insurer(cadent), has to keep collaterals with the same insurer, that can be collected in form of withholding premium or letter of credit(LC) from an Indian bank,.

However, overseas reinsurers, which generate almost 1/3rd of Indian reinsurance premium and are much sought after by Indian general insurers including PSU companies as they provide cheaper covers, had resisted the new collateral norms and it was expected that a lot of these overseas reinsurers will exit the Indian market during forthcoming Apr 1 renewals, thereby triggering a large scale market disruptions in terms of capacity crunch and hardening of rates.

“ Belying expectations that there would not be sufficient capacity for traditional lines or specialty lines as portrayed by certain quarters. GIC Re and FRBs and IIO reinsurers came in strong support of the market at Apr 1 renewals. In most of cases, programes were over placed with a choice of plenty for insurers with India being a focus market for many reinsurers given the competitive pressure at Jan 1 renewals and Apr 1 renewals in other markets ,’’ said a CEO of a FRB, who doesn’t want to be named.

Overall ceding companies gained by better security with better pricing and could claw back to price levels that were before hard market levels. Apart from property where insurers with good results enjoyed an uptick in commisions the ones with poor or average results got away lightly without a dent in their commissions, said market observers.

The balance was clearly on insurers side with reinsurers clearly taking the longer term view . It will be interesting to see how this view transpires given the price competition in the direct market with recent headline risks like BPCL and GAIL obtaining massive discounts to current prices, commented market players.

Excess of loss(XL) programmes saw some rate reductions from increased combination coupled with benign cat events. Pro-rata term saw changes commensurate to performances. Slight movements based on loss of ratio performance, said international re/insurance broker Gallagher Re in its commentary on Ap1 1 renewals in Indian market..

Confirming a smooth Apr 1 renewals, N Ramaswamy, CMD, GIC Re, the 10th largest global reinsurer said, “Yes, we did write more business than last year. Still in the process of collating signed lines to arrive at the final picture.’’

N Ramaswamy, CMD, GIC Re

“ Generally, we found the market to be soft with rates either below or same as expiring. Reinsurers are watching to see whether primary insurers are maintaining price adequacy, especially in property class of business. We did not see any disruption in the market due to the recent collateral imposed on CBRs. We believe most CBRs are currently ok with the premium withheld option,’’ he added.

Echoing Ramaswamy, Girija Subramanian, CMD, New India Assurance, the country’s largest multinational , said “Our April 1 renewals have been smooth and well-executed. We approached the renewal process with a strategy to not overextend on risk retention while trying to meet the company’s long-term goals. Our disciplined underwriting approach and strong relationships with our reinsurers ensured that the renewal process was seamless.’’

Girija Subramanian, CMD, New India Assurance

NIA has placed its treaties with GIC, FRBs, IIOs and CBRs and most of the CBRs with whom NIA has placed its treaties have preferred the premium withheld options, informed Subramanian.

On pricing Subramanian revealed most business lines observed stable pricing conditions throughout the period.

“ Although, select market segments displayed moderation, the broader market maintained a cautious stance in response to new global risks and recent catastrophic events. The pricing structure met our projections during this period while we adjusted terms and conditions to reduce potential market volatility,’’ she elaborated.

“We managed to position our portfolios smoothly without any significant challenges. The combination of active collaboration with reinsurance partners and strategic portfolio diversification resulted in timely completion of the placements. We continued to maintain a balanced combination of proportional and non-proportional treaties to match both our risk tolerance and business objectives,” explained Subramanian.

Sources at United India Insurance (UII), another large PSU general insurer, said, “ We could secure all our major renewals. Due to the application of IIB(Insurance Information Bureau) rates on property, the health portfolio came under strain.

“However, reinsurance placement at Apr 1 renewals was smooth and have been fully placed. All lines were oversubscribed, some even exceeding 200 per cent. The market was generally soft. CBRs have agreed for collateral barring a couple of them,” UII sources highlighted.

Sudhir Salian, Managing Director, Head of India at Hong Kong based Peak Re, who has been designated to oversee the development of the Peak Reinsurance Company Limited IFSCA Branch said there is a softening trend during India’s April 1 renewals.

Sudhir Salian, Managing Director, Head of India at Hong Kong based Peak Re

“However, the terms of the contracts have held in most cases, which reflects a high level of market discipline. Capacity has not been a constraint during the April 1 renewals,’’ he said.

Peak Re, which has been underwriting Indian business for over a decade as one of the overseas players, has set up its operations at GIFTY-IFSC in February.

“India is a core market for Peak Re, and we are excited to deepen our presence through the new branch. We have been underwriting in the Indian market for over a decade, and the IIO provides us access to the opportunities India presents. While there is no change to our risk appetite or approach, we remain focused on forming strategic partnerships with our clients. We will evaluate all opportunities on their own merits, with decisions made on the basis of long-term partnerships with cedents,” commented Salian.

The GIFT IFSC is India’s sole International Financial Services Centre(IFSC) , offers a host of advantages in terms of taxes and capital to attract overseas reinsurers into India and is meant to compete with other IFSCs located in Dubai, Hong Kong and Singapore by developing India as a Reinsurance Hub.

Tarun Mathur, Co-founder and chief business officer, Policybazaar For Business, said the Indian market has been abuzz with a lot of speculation around rate hardening and a lot of talk on reduced participation from CBRs owing to collateral being mandated.

Tarun Mathur, Co-founder and chief business officer, Policybazaar For Business

However prima facie, the ground reality seems to not follow. In terms of rates, we have seen a lot of back and forth but still the rates remained aggressive and a lot of interest remained from the Cross Border Reinsurers. Also, while the large lines did find enough and more subscription, specialized lines like corporate cyber have become a bit challenging, mentioned Mathur .