A number of factors, including recent regulatory changes, geography, economic growth and exposure to natural catastrophes have positioned India to become a global reinsurance hub, according to the International Regulatory and Development Authority of India (IRDAI).
IRDAI noted in its annual report that India currently has very low levels of insurance penetration but high vulnerability to natural catastrophes, leaving ample scope for its re/insurance industry to expand “aggressively and inclusively.”
The Indian reinsurance sector is also benefiting from a healthy level of competition following regulatory changes that enabled the entry of new entities such as Lloyd’s India and Foreign Reinsurance Branches, including Swiss Re, Munich Re, SCOR, RGA, Hannover Re, XL Catlin and Gen Re.
Nevertheless, these branches are required to maintain a minimum retention of 50% of Indian business, and IRDAI has upheld its order of preference rules that give first refusal in reinsurance contracts to the country’s only active domestic reinsurer, GIC Re.
GIC Re reported that its total net premium written increased by 24.72% to Rs 37634.46 crores (US $5.28 billion) during 2017-18, while net premium earned rose 42.60% to Rs 38096.05 crores ($5.35 billion).
The company also booked an after-tax net profit of Rs 3233.59 crores ($454.26 million) in 2017-18 and reported a solvency ratio of 1.72 as of 31 March 2018, compared with 2.40 for the previous year.
India’s other domestic reinsurer, ITI Re, has been granted license to carry out reinsurance business but has yet to commence its operations.
With an increase in the number of international reinsurers opening branches in India, IRDAI expects that capacity will increase, resulting in the establishment of a reinsurance hub in India.
The regulator also claimed that India’s geographical location in the heartland of South Asia, as well as its relationships with the Chinese and Middle Eastern markets will position it to become a reinsurance leader.
At the same time, India has a rapidly expanding economy and is ready for further re/insurance penetration, IRDAI claimed.
The development of India’s international financial services centre (IFSC), Gujarat International Finance Tec-City (GIFT City), also represents a step towards competing with other global financial centres, such as Singapore, London and Tokyo, IRDAI said.