Foreign reinsurance companies have mobilised Rs 6,216 crore premium in 2017-18, their first full year of operations in India. Out of nine foreign reinsurers, Swiss Re — the second largest global reinsurer — has the largest share of Rs 2,047 crore, while Munich based Munich Re and Paris-based SCOR SE have reported Rs 1,307 crore and Rs 1,186 crore of premium, respectively.
During the year 2017-18, foreign reinsurance branches infused assigned capital of Rs 1,452.54 crore, Insurance Regulatory and Development Authority of India (IRDAI) said. Foreign reinsurers had recently asked the IRDAI to scrap the practice of giving first preference to public sector GIC Re for any reinsurance contract.
GIC Re reported a total net premium of Rs 37,634.46 crore in 2017-18, as against Rs 30,174.56 crore in the previous period. Three out of nine foreign reinsurance branches in India have already reported profit after tax, while the remaining six have reported loss in 2017-18.
Swiss Re has reported a profit after tax of Rs 60.96 crore, while Axa France and Lloyd’s have reported a profit after tax of Rs 7.67 crore and Rs 1.69 crore, respectively. Overall, total losses of all nine foreign reinsurance branches were Rs 323.03 crore.
The total assigned capital of foreign reinsurance branches increased to Rs 2,570.35 crore, as of March 2018, from Rs 1,117.81 crore, as of March 2017, the insurance regulator said in its Annual Report.
Global players could force GIC Re to pull up its socks
The entry of nearly a dozen foreign reinsurance players has given a strong signal to public sector reinsurer GIC Re, which controls about 85 per cent of the market, to pull up the socks. GIC has managed to stave off competition as it has the “first right of refusal” in all domestic businesses. There is no guarantee that this protection will last for ever. With global giants with deep pockets like Swiss Re and Munich Re waiting in the wings, competition is likely to hot up in the coming years.
As many as ten global players including Hannover Re, RGA, Warren Buffet-owned Gen Re and Catlin have set up their branch operations in the country, in the wake of numerous regulatory changes in the recent past.
The latest player to enter the Indian reinsurance market is Allianz, which has got a licence through its arm Allianz Global Corporate & Specialty (AGCS).
The company is expected to begin its operations this month and will bring in its international services and expertise to global clients in India. CB Murli, a former senior official of HDFC Chubb General insurance, has been appointed as the CEO of the company.
FM Re (Factory Mutual Reinsurance) of the US has applied for a license to set up its operations in the country. FM Re is a highly specialised reinsurer and only focuses on a few clients and segments for business.
Meanwhile, MS Amlin, the first Lloyd’s syndicate which had set up its operation at Lloyd’s India platform in India, has exited it. The company’s exit from the Indian market is part of restructuring of its global operations focusing on cost and synergy, said a source.
The slow pace of growth and higher cost of procuring Indian business had made the company rethink its India strategies drastically in the first year of its operations itself.
However, the company will continue to do India business through its Singapore and London desks. Now, just one syndicate, Markel, is doing business in Lloyd’s India platform.
The fate of ITI Reinsurance, the first private sector reinsurer set up by Sudhir Valia and whose takeover by Prem Watsa’s Digit was turned down by the IRDA, is not known.
The company, which completed two years without doing any business, had shown a profit of over Rs 17 crore at the end of FY2017-18, according to the IRDAI annual report.
It further said the extant reinsurance regulatory framework favours the creation of a reinsurance hub in India. IRDAI recently carried out a comprehensive review of the extant reinsurance framework in concurrence with the dynamic needs of the industry.
The new architecture will strive to act as a catalyst in India’s journey to establish as a global reinsurance hub, in the near future. A multitude of factors favour India having a regional reinsurance hub.
“Geographically, India is located in the heartland of south Asia and has conducive relationships with the Chinese and Middle Eastern markets.
Economically, India is forging ahead as an emerging economy with enviable growth rate. Environmentally, the frequency and severity of natural catastrophes call for proactive and innovative reinsurance mechanisms to mitigate the impact of disasters.” IRDAI said.