The Indian general insurance sector in the country grew at a slower rate of 17  per cent in FY2018 after a robust growth of 32 per cent in FY2017. 

As per ICRA research, the private sector growth continued at a faster pace (22 per cent Y-o-Y during FY2018), compared to the PSU growth of 13 per cent during FY2018. 

Owing to the sizeable difference in growth rates, the share of the private players in the overall market improved to 55 per cent in FY2018 from 53 per cent in FY2017.  

The research paper analyses the performance of 17 general insurance cCompanies  (comprising four insurers from the public sector and thirteen from the private sector) collectively representing around 94 per cent of the Industry-wide Gross Premium Written (IGPW) but excluding ECGC, AIC of India and specialised health insurers in FY2018.


Says Mr Karthik Srinivasan, group head, Financial Sector Ratings, ICRA, “Private players continued to lead the recovery in the industry with a Y-o-Y growth of 22 per cent in FY2018 vis-a-vis a growth of 39 per cent in FY2017. 

In FY2018 the growth in private sector players was due to higher GDP from Health and Motor business. We believe that private players will continue to display strong growth in Motor, while Health sector business (retail business) will continue the strong run in FY2019. Crop insurance growth for the private players will continue but not as rapidly as FY2016/17 growth rates, as PSU insurance companies have started bidding for business in 2017, and loss rates have increased in FY2018.”


On the other hand, PSU players growth was muted in FY2018 to 13 per cent Y-o-Y (annualised), as the companies rationalised growth to reduce underwriting losses. The slowdown in business was evident in the fire/property segment, and Motor OD segments.


However, health and motor TP bucked the trend, and the PSU insurers grew rapidly in these segments. 
ICRA expects the PSU insurers to improve pricing in Motor OD segment, and be more selective in health segment in FY2019. This would result in a slower growth but a relatively better from underwriting profitability. 


The solvency levels for PSUs continued their downward trend in FY2017 due to high underwriting losses. However, there was some respite in 9M FY2018 with the median solvency ratio climbing at minimum levels. However, it should be noted that at least three of the four PSU insurers have used a part of fair value adjustment for solvency calculations. 

Meanwhile, select private sector players have seen an improvement in the solvency ratio over the past few years (median of 1.78 as on December 31, 2017). 

ICRA expects the private sector general insurers requiring Rs12 billion to Rs. 30 billion of capital infusion in FY2019, to maintain the current growth rate of 17-20per cent  (on a modest profitability base). 

However, if the private sector continues with its current profitability 13 per cent  for the select private players), the capital requirement would fall to Rs 12 billion. 

With insurance companies, allowed to raise Tier 2 bonds, companies could explore this route to raise their solvency levels. 

As per estimates, insurance companies have raised around Rs 25.8 billion till date by way of Tier 2 bonds, with more companies looking at this route to bolster their solvency levels.  

PSUs are likely to meet a large part if not all capital requirements through the large unrealised gains on their equity investments (as on December 2017, it stands at over Rs 471 billion of which 30 per cent of which has been factored for solvency calculation by 3 PSU insurers). 

However, since no such comfort is available for the private sector players of the Industry, their requirements are likely to be met through external sources.

“Even as actual capital requirements will depend on the business mix, growth rates and claims experience, ICRA estimates that to maintain a solvency of 1.65 times (compared to the regulatory requirement of 1.5 times) while growing at a CAGR of over 18-20 per cent and maintaining similar claims records, the private sector players in the industry would require around Rs. 12 billion to Rs. 30 billion of equity capital over the next five years,”concludes  Srinivasan.