Substantial and sustained growth for reinsurance is forecasted in India, driven by expansion in construction, energy, liability and agriculture lines of business as the country continues to see strong GDP growth, according to Munich Re.
Munich Re’s Economic Research unit has projected steady growth for the Indian reinsurance market, with more than 9 percent annual real premium growth in property & casualty and around 10 percent in life premium expected between now and 2025.
Munich Re Board member for Life and HR, Joachim Wenning, said; “With excellent growth opportunities, India’s life insurance market is an important pillar in our medium-term strategy.
“Our local presence and expertise, especially in solvency-related solutions, help us to offer individually structured programmes tailored to the needs of our clients and jointly realise the potential of this emerging market.”
India is one of the fastest developing regions, growing at a rate of around 7.6 percent (recorded in the 2015-2016 financial year), and by 2020 the economy is predicted to become the third largest in the world.
This booming economic growth, coupled with a maturing insurance market and a digitalised population, make up a conducive, and increasingly profitable re/insurance environment.
And the reinsurance giant has worked to establish a strong base in India to take advantage of the innovative potential of the growing market; “As a market with still low insurance penetration of 3.9% compared to the worldwide average of 6.3% (2013 figures cited by The Times of India), the country offers room to introduce future-oriented concepts and approaches, in line with Munich Re’s strategic focus on innovation.”
In addition to its reinsurance business with insurers and industrial companies, Munich Re’s primary insurance activities have focused on (HDFC Ergo joint venture) and health (Apollo Munich Health); “A look at the country’s growing industries and expanding middle classes reveals a real need for high-quality risk solutions.
“Life and health covers as well as products to protect private and commercial assets from risks like natural catastrophes can support the long-term wellbeing of India’s economy and society. ”
The fast developing Indian subcontinent represents both new challenges and opportunities for global reinsurers, and the industry appears poised for the challenge with five global reinsurance firms set to launch branch operations after being given market access by the Insurance Regulatory and Development Authority of India in December last year.
The list of reinsurance firms that have received so-called R3 approval includes the largest four global players, Germany’s Munich Re and Hannover Re, Switzerland’s Swiss Re and France’s SCOR, as well as the U.S player Reinsurance Group of America (RGA).
As these players prepare for expansion into India, another fast-rising star of the East – once hailed as the new land of promise for re/insurance – has just seen global reinsurers pull out.
Three of the world’s largest reinsurance firms have all pulled back on their China underwriting, as margins for the business become increasingly thin and local competition starts to influence the market.
Showing that despite the apparent enormous opportunities of growing markets like India and China, expansion doesn’t always work out the way reinsurers had planned. The Chinese reinsurance market has seen a number of local companies launch in the last year and this is assumed to be one of the factors ramping up pressure in the region for reinsurers.
This suggests that global reinsurers have been feeling the effects of the Chinese tendency to seek to bring sectors within their borders and under their control. The major reinsurers have in some cases spent years helping to create a Chinese reinsurance market, but now it seems that local start-up reinsurers may increase their share, at the expense of foreign players.
And despite the maintained optimism over India, there’s no guarantee that the market won’t follow the Chinese protectionist trail, given the government’s tendency to ensure its own reinsurers retain a bulk of the market share.