India’s property catastrophe pricing increased by double digits at this April’s renewal, a significant uplift for the market by historical standards, and higher than those seen in Japan, suggests Aon.
Aon’s analysts explain that April is the main renewal for India, as it sees a vast amount of the country’s P&C insurers purchase reinsurance protection, across all lines of business.
Risk adjusted rate increases this year for catastrophe excess of loss were notable, and almost tripled the increases at the April 2022 renewal.
Aon writes, “Some deductibles also increased but remained relatively low. Risk excess of loss increases were more moderate, but still double-digit, while deductibles also increased.
“The attractive rating environment for reinsurers, however, ensured an adequate supply of excess of loss capacity at April 1, and a limited number of new reinsurers are now entering the market.”
Meanwhile, the proportional market in India remained challenging, though Aon anticipates that placements will be completed.
The firm’s analysts note, “Commissions for proportional covers came under increased pressure at April 1, while reinsurers moved to reduce event limits and increase loss participation clauses.
“However, conditions varied, with some insurers experiencing little change in terms. India is an attractive market for reinsurers, following a period of market liberalization and strong economic growth.”
Aon observes that with low penetration levels, the insurance market consistently posts robust underlying growth, while the government is actively looking to expand access to insurance, having recently developed insurance products for low-income consumers.
Further, India has significant catastrophe exposure, which includes earthquakes, cyclones and floods, with growing interest in potential public private solutions to protect against natural perils.
By contrast, India’s agriculture market remained stable. Aon’s analysts state that Asia Pacific accounts for around 40% of global agriculture reinsurance premium, with India itself accounting for the majority share.
“The country is one of the world’s largest agriculture insurance markets behind the US and China. Strong growth prospects and good performance have ensured continued reinsurer support at the April renewal.
“Reinsurer appetite for Indian agriculture risk ensured there was ample supply of capacity to meet increased demand.
The vast majority of the approximately 50 reinsurers participating in the renewal deployed additional, while a handful of smaller reinsurers have entered the market.”
Aon expects India’s agriculture insurance market to grow rapidly in the coming years, as its government aims to raise penetration levels to 50% from the current levels of about 30%.
The analysts add that premium growth will also reflect higher sums insured due to inflation, as well as potentially new states joining the scheme.
Aon concludes, “With year-on-year growth, profitability and strong government support, India’s agricultural insurance market continues to be attractive to reinsurers. Additional reinsurance capacity will be required to satisfy future demand growth.
“The launch of Aon’s first Indian crop model last year marks a turning point for the market, and should attract more reinsurers to the sector, as well as help the country’s crop insurers develop a more informed and custom view of risk.”