The COVID-19 pandemic presents many opportunities for the growth of reinsurance business in India, according to Rohit Boda, Managing Director of J.B. Boda Group, an insurance and reinsurance broker based in the country.
Speaking in an interview with Reinsurance News, Boda noted that the contention around business interruption claims linked to the pandemic could fuel new demand for such products in the aftermath of the crisis.
The Indian market does not currently cover BI losses related to COVID-19, but businesses will likely be far more wary of this peril in future, and other BI coverages linked to political unrest could also be given more attention.
Additionally, Boda believes the medical insurance market will see a significant degree of change after the outbreak, as the market tackles questions about levels of adequate coverage.
And in the cyber market too, there is expected to be an increase in demand for insurance as businesses migrate from a physical presence to a virtual one.
“The new era of ‘work-from-home’ to reduce the COVID impact makes data security a sensitive topic for the organisations to look at these kind of arrangements,” Boda told Reinsurance News.
“Today, the Asian continent in particular is at a learning stage and this wakes the need for a reinsurer who specialises in this class of business, and hence an opportunity.”
Boda also sees a chance for more aggressive reinsurers to take advantage of instabilities in the Indian market after the pandemic.
He noted that lockdown measures have resulted in a huge impact to the economy, particularly for workers in the informal sector and rural areas, while the credit insurance market is expected to see delayed payments and the danger of defaults.
Another major line of business that could be of interest to reinsurers in India is event cancellation, with many sports events and concerts getting cancelled due to the pandemic.
“Post Covid the uptake of this class remains to be seen as for now a complete demolition and a paradigm shift of mindset to get back in a crowded place due of the spread of Covid remains a question mark,” Boda said.
“The daunting task of measuring the exposure in the country due to COVID-19 is a serious question and leaves all the parties think about the estimation on the calculation between insurance and reinsurance fraternity,” he continued.
“In addition to the capital injection into the economy, there has been a lot of value-add that these reinsurers will have to bring to market through expert human resources, especially on the specialised lines.”
Insurance penetration in India was just 3.5% at the end of 2019, meaning there is massive potential for the industry to grow in this country of 1.5 billion people.
According to IBEF, in 2019 gross direct premiums of non-life insurers grew 12.8% to $25 billion, with much of this increase attributable to new agricultural insurance schemes in the country.
Many therefore see India as potentially becoming a major reinsurance hub in the next 5 to 7 years, with analysts at GlobalData estimating that the reinsurance market could reach $7.8 billion by 2024.
“The importance given by the government to this segment with the introduction of public schemes especially for the poorer sections of the society has made insurance one of the important financial tools of protection,” Boda explained.
“Throwing back to the recently concluded decade and the growth of insurance in the country, the future certainly looks humongous in India.”
There have been signs that more and more foreign reinsurers are now looking to enter the Indian market, meaning there should remain plenty of competition over pricing despite the large volume of available business.
But Boda believes this trend will be beneficial to the local market in the long-term, as Indian re/insurers draw from the knowledge and experience of the more establish market players.
“As the market grows and becomes more mature the expertise and the technical skills of these foreign reinsurers will be of prime importance,” he told Reinsurance News.
“The innovation and the reinsurance backed insurance products have seen a great rise with capital and skills brought in by foreign reinsurers,” Boda noted, adding that t”he authorities are studying the market and regulations have been changing gradually making the law reinsurer-friendly to the international world.”
