India’s slowing economy to weigh on re/insurers, says Moody’s

"India's GDP growth weakened to its slowest rate in five years in the fiscal year ended March 2019, and the resultant financial pressure on rural households amid weaker job creation is in turn also weighing on premium growth," says Benjamin Serra, a Moody's Senior Vice President.

 

Dubai:

Moody's Investors Service  in a report has said that India's slowing economy will weigh on insurance premium growth over the next 2-3 years, although supportive measures put in place by the Insurance Regulatory and Development Authority of India (IRDAI) will help counterbalance the deteriorating economic environment.

 

"India's GDP growth weakened to its slowest rate in five years in the fiscal year ended March 2019, and the resultant financial pressure on rural households amid weaker job creation is in turn also weighing on premium growth," says Benjamin Serra, a Moody's Senior Vice President.

 

"Nevertheless, the country's low insurance penetration rate suggests ample room for further growth, while supportive government and regulatory initiatives are also helping mitigate the currently challenging environment for Indian insurance and reinsurance companies," adds Serra.

 

Health premiums in particular are likely to increase as a result of the Ayushman Bharat, or National Health Protection Mission, a government-funded initiative that aims to provide 100 million families with up to Rs500,000 (~$7,000) of health insurance coverage each year.

 

Additionally, the IRDAI has put in place a series of measures, including the removal of the limit on foreign ownership stakes in Indian insurance intermediaries, which will strengthen distribution capabilities.

 

The regulator also plans to introduce a new risk-based capital (RBC) system with similar principles as the Europe's Solvency II regime, which should help improve insurers' risk management, while measures to safeguard customers and encourage innovation should help raise the insurance penetration rate.

 


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