GIC wants to sell stake to private insurers

The plans will not only see the government stake disinvested, but also ensure a steady flow of business.

The corporation made a detailed presentation to the Finance Minister P. Chidambaram last week when he visited GIC’s headquarters in Mumbai.

Though the UPA government, supported by Left parties, has taken an extremely cautious stand on disinvestment in general, Chidambaram reportedly gave GIC a patient hearing when it presented its novel disinvestment plan to him.

In the insurance business, big risks are always divided both horizontally by more than one player) and vertically (by reinsurers) so that in case of claims, the hit is also shared by multiple risk carriers. The insurers always reinsure their business with multiple reinsurers to protect their balance sheets.

GIC, which currently gets 20 per cent mandatory business from domestic general insurers and 10 per cent of risk business from domestic life insurers, is the only reinsurance company in the country.

As part of its global expansion, the reinsurer, which clocked a Rs 1,000 crore net profit in 2003-04, plans to foray into China and Malaysia shortly. It already has operations in London and Moscow and will shortly set up an office in Dubai.

The other global reinsurance giants, including Munich Re, Swiss Re and General Re, are waiting for broader reinsurance guidelines from the Centre to set up their operations in the country. However, some of these reinsurers have already entered India as service companies.