India’s state-backed reinsurer, the General Insurance Corporation’s (GIC Re) chairperson, Alice Vaidyan, highlighted the need for pricing discipline and a level playing field to achieve long-term sustainability in the re/insurance industry in India, in an interview with The Economic Times.
The reinsurer, which benefits from India’s policy of offering first-picks in the re/insurance market to local firms, grew by an outstanding 82% this year, and as one of the largest agriculture reinsurer’s in the market, has been collaborating with the Indian government to ensure viable pricing in the government’s agriculture scheme.
In response to questions over concerns of adequate pricing, Vaidyan commented that for the first time in crops, actuarial pricing has been introduced and “the scheme has served farmers and companies well. Going forward, looking at the success of the crop insurance scheme, it can be used as a model for other schemes.”
She added; “We will be the custodians of market data on crop insurance. From an analysis point of view or reinsurance point of view, we help collate and analyse data for insurance.
A state government tenders this and when the pricing is not adequate, we tell them and make it viable.
This is the biggest crop insurance scheme introduced in the world. The world is watching us. GIC has become the largest agriculture reinsurer in the market. We want to build expertise on this.”
However, challenges for stakeholders in India’s crop re/insurance sector persist, and Vaidyan said GIC has been working to address the balance that she sees as being tipped towards corporate clients.
She said corporate clients have benefitted disproportionately from pricing rates as the “entire insurance sector is subsidising corporate clients.
“India has not been a very profitable model in the last 10 years. This has to turn profitable. IRDA is trying its bit to bring in technical pricing to have more focus on the bottom line.”
“The agriculture reinsurance giant has been supporting technical pricing in the market, Vaidyan said, adding that “for long-term sustainability, the industry has to see pricing discipline.”
GIC has become the only reinsurance company to be listed in India, and in addition to a sky-high domestic growth rate, has spread its reach into the international markets.
And to insure the reinsurer can keep its capitalisation base covered and maintain solvency with this impressive growth, the firm’s looking to raise capital through an IPO.
“Any insurer or reinsurer will need capital to support growth. The growth aspiration of the Indian market is high, whether in crop, motor, health or the infrastructure sector. The purchasing power of Indians is going up. To fund all these aspirations, we will need capital. An IPO for raising capital is a very good idea,” Vaidyan told the India Economic Times.
She added that alongside continued domestic growth, the reinsurer would be looking for more diversification across lines of business and geographies; “We need to grow in the domestic market, which we are doing. We will grow equally well in the foreign markets.We write business in 175 countries though we have presence in six countries. We use knowledge of these countries and grow well. We are already the 12th largest reinsurer in the world. “
