After waiting long, five global reinsurers have kick-startedtheir operations in India on Wednesday. The top three global reinsurers, Munich Re, the largest reinsurance multinational, Swiss Re, Hannover Re along withFrench major SCOR and Reinsurance Group of America(RGA), the largest life and health global reinsurer have started their India operations after completing the regulatory formalities, as required by the regulator IRDAI, to set up branches in India.
GIC Re, the country’s official reinsurer, since 2000, has been sole reinsurer in the $2.5 billion reinsurance domestic market.
Two more reinsurance multinationals, XL Catlin and Lloyd’s of London, who have also received their final approvals in the third week of January to set up operations in the country, are getting ready to start their operations shortly.
Also the first-ever private sector reinsurer ITI Reinsurance, promoted by the Sudhir Valia, one of the promoters of the India’s largest pharma company-Sun Pharma, has already started its operations a few days back.
All these global reinsurers, except RGA, will be waiting for April 1 when $15 billion worth of non-life business are renewed in the Indian markets.
“Hannover Re is happy to announce the commencement of their Indian Branch operations with effect from 01 February 207 from Mumbai. All lines of business will be underwritten from the branch with the support of experienced staff,’’ said GLN Sarma, chief Executive officer, Hannover Re, India.
Another two global insurers-Gen Re, Axa Re are waiting to clear two more approvals to start their operations.
All these reinsurers are already doing India business onoffshore basis and together with other overseas reinsurers have a 50 per cent of market share.
According to the market sources,Swiss Re, the second largest global reinsurer has the maximum exposure of over $ 400 million and others are having portfolio between $100 million to $250 million.
However except GIC Re, none of the of the reinsurers are making profit out of the Indian market.
Analysts have pointed out that though these new reinsurers except ITI Reinsurance, may not be able to expand their business in near terms and would make efforts to retain the existing market share out of their offshore business in the country. In the medium term, Indian economy with reforms, improved infrastructure, rising middle class, increased private consumption will provide larger opportunities for the new reinsurers, said analysts.
The impact on reinsurance pricing out of the new competition will be clear on Apr1, said analysts.
IRDAI’s regulations stipulate that an Indian insurer should give preference to a foreign reinsurer. Only if this doesn’t work out, primary insurers can it approach those foreign reinsurers who have the requisite licence.
“We believe opportunities exist for foreign reinsurers with sophisticated product development and strong technical underwriting expertise that are willing to invest for the longer term,” said S&P Global Ratings credit analyst Philip Chung in the report, ‘ReinsurersFlock To India Despite An Uneven Playing Field’.
In the shorter run, however, India won’t be a walk in the park for foreign reinsurers, as the direct non-life insurance industry has been making underwriting losses for many years.
Source: Asia Insurance Post
Date: 1st February 2017