Insurance companies in India continue to grow and as the primary market expands, insured sizes are on the rise, driving more and more mega and ultra mega insurance policies in the country, all of which suggests growth for India’s reinsurance market, according to Azeem Kanjiani, Member Executive Board, Reinsurance, Prudent Insurance Brokers.
In an interview with Reinsurance News, Kanjiani provided insights on some of the significant changes expected to occur in the Indian reinsurance market over the next five years, the impacts of recent regulatory changes, how the Indian market is responding to recent changes in the risk appetite of major reinsurers, and more.
“As the Indian insurers grow, their own retention and capacities with reinsurers are increasing,” said Kanjiani. “At the same time, insured sizes are increasing and the number of mega policies in India and ultra mega policies are also increasing. The reinsurance pie will, therefore, increase, even while retentions and capacities increase.”
Kanjiani went on to note that it’s also likely that MGAs will be established in GIFT city, which will add further capacity to the market.
“The need for higher limits on liability lines, the increase in demand for specialized products and services will all lead to innovative practices evolving in the reinsurance market.
“We expect the Indian government will encourage more Indian reinsurers to be created and to have greater business activity in GIFT city attracting all possible players from the world to make GIFT city a reinsurance hub,” he said.
As highlighted by Kanjiani, there has been somewhat of a shift in the risk appetite of major reinsurance players in the Indian market, with reinsurance premium in the country currently at around $30 billion, but this is expected to more than triple to $100 billion by 2034.
“The reinsurance market is soft as the treaties on a bouquet basis are profitable, hence, there is overcapacity. Major reinsurers have set up offices in India. Furthermore, other reinsurers are setting up offices in GIFT City, which will provide further capacity (Peak Re, Berkeley Re, QBE, Doha Insurance Co). These reinsurers will exert further stress on human asset which is scarce,” explained Kanjiani.
Adding, “Effective April 2025, foreign reinsurers are subject to collaterals, therefore, quite a few reinsurers have withdrawn or have curtained involvement or stayed put. Programs for Indian insurers were largely placed/over placed, except a few programs such as casualty with some loss spikes.”
The country’s insurance and reinsurance industry regulator, the Insurance Regulatory and Development Authority of India (IRDAI), has been working to expand the domestic reinsurance industry and increase insurance coverage in India. In light of this, Kanjiani discussed which of the significant regulatory changes have affected the industry the most.
“Reinsurers have setup offices in India, built expertise and focused on developing new products. The reinsurers who have a branch in India have preference to see business before CBR’s can sight these opportunities. Of late, collateral has been a phenomenon which has diminished interest of CBR’s. These changes do not let the market develop/grow organically, ideally, it should operate based on economic forces (demand and supply),” he said.
One thing the IRDAI has done is opted to open up the country’s insurance industry to 100% foreign direct investment.
According to Kanjiani, the “IRDAI has provided sufficient time to Indian entrepreneurs to scale up their operations in the Indian insurance market and it was time to open up the sector to the world. Choice is always good for the customer and competition spurs innovation and new models for efficiency and product development.”
Given all of the changes in the reinsurance market globally and in India, we asked Kanjiani how Prudent Insurance Brokers is handling the adjustments to provide their clients the best available coverage and rates.
“The direct market rates are competitive, and a significant amount of the premium is on quota share basis. Mega risks with XOL structures are where we as brokers add the most significant value. Further advantage is that with our strength on the direct portfolio, we are able to have a sense of the market and position ourselves.
“Coinsurance/domestic reinsurance plays a significant role source of capacity for medium risks. Developing facilities/lineslips is also a medium to supplement capacity for specialty classes of business,” said Kanjiani.
Building on this, Kanjiani offered some insights into what strategies insurers in the country should leverage to be competitive in light of inflation and economic uncertainties that are influencing insurance pricing globally.
“Indian insurers are operating on proportional capacities, which yield commission and solvency relief. Despite which these companies operate at a combined ratio of around 100% and above, the best performer is at 99.30%. On the other hand, the Reinsurance programs operate profitably, hence the paradox (Reinsurers are making profits, however, Insurers are losing money),” he said.
Continuing to stress that, “Indian Insurers should focus to be ranked on underwriting profits not top line. Dependency on investment income, which in true sense should be ancillary source of income brings profit to most insurers. With the current global economic turmoil, investment incomes are also uncertain. In my opinion, underwriting profits should be the focus, which means bringing efficiency with the cost (claims, reinsurance and distribution) and charging the free real price (ease hurdles regarding pricing).”
To end, we questioned Kanjiani on the potential for India to adopt alternative risk transfer mechanisms, such as catastrophe bonds, a rapidly growing part of the insurance-linked securities marketplace.
“Indian markets are used to proportional capacities, which gives albeit limited (but more than sufficient) horizontal cover and unlimited vertical cover. As such no insurers avail of these non-traditional risk transfer mechanisms. Even national reinsurers buy XOL covers and do not resort to structured solutions.
“These techniques should ideally be used to improve combined ratio i.e. as of now, the treaties are profitable whereas the combined ratios are 99.3% and above. Reduction in interest rates, stringent solvency norms, pressure from IRDAI to go public may require insurers to resort to these non-traditional techniques,” he said.
