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Mint
3 days ago
- Business
- Mint
Unfazed by new players, GIC Re gears up to reclaim market share
Mumbai: Encouraged by promising results in the previous fiscal year, General Insurance Corporation of India (GIC) Re is looking to take the fight to its private-sector and foreign rivals. The country's largest and oldest reinsurance company grew its non-obligatory business for the first time in four years. The reinsurer posted a net profit of ₹6,701 crore for FY25, higher than ₹6,497 crore in the previous year. Earned premium for the year stood at ₹36,130 crore compared to ₹33,576 crore in FY24. Combined ratio, a profitability metric that indicates whether an insurer is making an underwriting profit or loss, improved to 108.8% for FY25 from 111.8% in FY24. Ramaswamy Narayanan, the company's managing director and chief executive officer, is aiming to bring this to below 100% over the next 6-7 years. Underwriting loss for the year reduced 16.4% to ₹3,352 crore. In an interview with Mint, Naranayan said the company is unfazed by the entry of new private players and falling market share, and the focus is now on profitability and improving the combined ratio. 'Today, I have the capital and the solvency. Going forward, GIC will write big-ticket shares in areas where there is profitability, growth and which gives us diversification. You will not see us writing the same classes again. We will look for opportunities elsewhere and that is where I see the strength of this company." Also read | Reform push: Insurance amendment bill heads to Parliament; changes to IBC, Companies Act will have to wait Narayanan attributed the fall in the company's market share in the domestic market from 60% to below 50% over the past 3-4 years to the increased size of the sector, entry of new players and more business being written by other existing players at a time when GIC itself was de-growing. Even so, GIC Re continues to write a big share in India, he said. 'The phase of de-growth and consolidation is done," Narayanan said, adding that growth going forward would be with profit. Reinsurance is insurance for insurance companies--insurers transfer their risk to another company to reduce the likelihood of large payouts for a claim. Reinsurers allow insurers to remain solvent by recovering all or part of a claim payout. Obligatory business Despite increasing calls for cessation of the obligatory business to GIC Re, Narayanan is confident that even if the obligatory business component is removed, GIC Re will only see a short to medium term impact. His confidence stems from the other-than-obligatory business that the reinsurer does today, called 'voluntary quota shifts'. This includes insurers which may feel that just giving 4% of business to GIC is less and may want the company to write more. 'So even if this 4% goes, I will get it back in voluntary quotations. I have no issues there," he said. Under the obligatory business arrangement, all insurance companies in India are required to get 4% of their reinsured portfolio covered by GIC. In exchange, GIC gives a certain commission back to the insurance companies. 'Will it hurt GIC if the entire 4% goes in a stroke? We will have issues explaining that obviously. Rating agencies will start worrying about what the business mix is going to be and how is it going to work? But I think over a period of time we will easily get it back," he said. Read this | How the crash impacts Air India, insurers and Boeing Narayanan emphasised that GIC's obligatory business has continued to grow despite the mandated percentage being reduced over the years from 20% to now 4%, purely because the overall market is growing. Currently, the obligatory business accounts for around 30% of the reinsurer's revenue, which is expected to fall considering the business consolidation undertaken by the company during 2020-2024. 'We really cut off a lot of loss-making businesses. So at that time, the obligatory business grew but other segments de-grew," he said, adding that this share in revenue could fall to about 25% by next year. The eventual plan is for the obligatory business to account for 25% of the business, international business for another 25% and balance 50% is the domestic business. Diversification Part of the growth strategy is also expanding the international business in order to diversify geographical risk for the reinsurer, especially for 'natcat' or natural calamities-related and political risk-related losses. This is done through sophisticated models to optimise capital management, Narayanan said, adding that while markets like the US may see more such incidents, the pricing is much better there compared with India, making it much easier to recoup losses. 'That is somewhere we have to improve because India is catching up in terms of the frequency and severity of incidents. And unfortunately, while climate change is a reality, a lot of these losses in India are due to how we manage our cities and how they are growing," he said. In October 2024, global rating agency AM Best upgraded GIC Re's credit rating to 'A-' from 'B++'. Beginning of calendar year 2025, the company started growing the international business. The reinsurer currently has overseas branches in Malaysia, South Africa and a subsidiary in the Lloyds marketplace in UK. Also read | LIC to decide on health insurer stake purchase in 2-3 months The second leg of diversification is being done through expansion into new product lines with the reinsurer now looking to write more health and motor insurance business—the two fastest growing segments within general insurance. 'We were pretty underweight on health. So we spoke to a lot of companies and we saw areas that could be of interest to us," Narayanan said. Competition Narayanan said he is not worried by the entry of private players into the market as he believes that GIC Re has always been a global player and its competitors multinational reinsurers and not domestic insurance companies. This includes Irdai awarding the reinsurance licence to Valuattics Reinsurance—marking the entry of the first private reinsurer to operate from within India. Narayanan believes the regulator could be open to awarding more such licences. "The point is, reinsurance is more capital hungry. So companies with deep pockets will need to come in. If they apply, I'm sure they will get it because Irdai wants more players to come into the market," he said, adding that it should not impact GIC's business because every company has their own way of getting business. While there is no shortage of business in India, a bigger issue is that India is perceived to be a very cheap market due to low pricing. 'Our competitors have always been, and even today, are multinational companies. I'm not competing with New India Assurance or Life Insurance Corporation. I'm really working with them and competing with Munich Re and Swiss Re and Hanoi," he said. In the face of this competition, what is expected to hold GIC in good stead is its long-standing partnerships that it has built over decades, he said. Also read | Third-party vehicle insurance: Insurers in distress over three-year rate pause 'GIC's relationships are more institutional. It's not about one person, but about the kind of support that we can give as an institution," Narayanan said, adding that as such, GIC does not work like a 'typical PSU" as it doesn't have too many offices or people and is a very lean organization. GIC Re currently has around 458 employees including recent recruitment of 80-85 people. HR overhaul Acknowledging the constraints that come with being a state-owned entity, Narayanan believes that GIC Re is trying to do things 'very differently". Hiring and human resource management is a key agenda for the organisation going ahead with Narayanan saying that while the reinsurer might not always be able to match its competitors' salaries, it is trying to offer value to employees in terms of work opportunities, differentiated training and learning across various lines of business as employees grow within the organisation. The objective is also to ready a second line of managers to take over the senior's role in case of exits or transfers. A lot of these HR-related changes are part of 'Project Parivartan'–introduced in 2022 and being spearheaded by KPMG, which GIC Re has hired as an external consultant to advise on the overhaul of its HR practices. The mandate for KPMG is to review existing HR practices and suggest global practices that can work within the PSU structure and factoring in the expertise required for this niche business. 'We have tried to see how we can restructure, also in terms of reducing hierarchy and red tape and creating clarity in what employees are doing and their role," he said. And read | Budget 2025: Insurers seek support for tax incentives, health cover, higher FDI limit
New Indian Express
3 days ago
- Business
- New Indian Express
AI 171 Crash: $475 million insurance claim ranks among India's costliest
CHENNAI: India's non-life insurance major, General Insurance Corporation of India (GIC Re), estimates that total insurance claims related to the June 12 crash of Air India Flight AI 171, a Boeing 787-8 Dreamliner, could reach up to $475 million (approximately ₹39.4 billion), making it one of the country's costliest insurance claims. The Ahmedabad-to-London flight, carrying 242 individuals—230 passengers and 12 crew members—tragically crashed shortly after taking off from Sardar Vallabhbhai Patel International Airport in Ahmedabad. Total claims for the Air India crash could reach $475 million, driven primarily by liability payouts, which are expected to exceed the aircraft's value by more than 2.5 times, GIC Re stated on Tuesday. In rupee terms, this translates to approximately ₹4,091 crore (based on current exchange rates). "The way we see it, the hull (the aircraft) will be around $125 million, and liability claims—on account of passenger liability, third-party liability, and other personal accident and travel policies—should amount to approximately $350 million," said GIC Re Chairman and Managing Director Ramaswami Narayanan. Only one passenger, British national Vishwash Kumar Ramesh, survived the crash. Additionally, at least 38 people on the ground were killed when the aircraft struck a medical college hostel in the Meghani Nagar area. The incident marks the first fatal crash involving a Boeing 787-8 Dreamliner and the deadliest aviation accident globally in a decade, according to aviation industry portal AviationA2Z.
Time of India
4 days ago
- Business
- Time of India
Air India plane crash: Claims could reach $475 million, says GIC Re
Air India crash (Photo: AP) Total claims from the Air India crash in Ahmedabad could touch $475 million, driven by liability payouts that are expected to be over 2.5 times the aircraft value, said Ramaswamy Narayanan, chairman and managing director of GIC Re. In rupee terms, the claims could exceed Rs 4,000 crore. "The way we see it, the hull will be around $125 million and the liability claims on account of passenger liability, third-party liability and other PA and travel policies in vogue should work out to $350 million," said Narayanan. Although GIC Re is not a direct insurer, it has exposure to the Air India fleet through reinsurance. As the national reinsurer, it also bears part of the loss incurred by every domestic non-life company, which is mandated to cede a portion of the risks it underwrites.
Indian Express
5 days ago
- Business
- Indian Express
Biggest problem for insurance industry is fraud: GIC Re chief
RAMASWAMY NARAYANAN, Chairman and MD of state-owned General Insurance Corporation of India (GIC Re), says the biggest problem for the insurance industry is fraud — whether it is health or motor or agriculture. In an interview to HITESH VYAS, GEORGE MATHEW and SANDEEP SINGH, Narayanan said the unregulated healthcare sector needs a regulator and GIC Re is discussing with the government on introducing a catastrophe insurance for the country. Excerpts: How do you see economic activities at the ground level? Are you seeing demand coming in from industries? Yes, it has happened. We are looking at good avenues of growth, definitely at the corporate level. At the retail level, it goes up and down, depending on how people look at insurance. We also have a big role to play in trying to educate people to look at insurance in a more positive way. When COVID happened, health insurance went up. Motor insurance is an area where we have found that some of the compulsory insurances are not taken by people. Overall, I look at the market growing very well. There are different areas or different pushes coming in, such as the regulator bringing out the slogan saying 'Insurance for All by 2047', which is pushing people to perform. As an industry, there is a huge amount of work that we need to do. The growth or the competition is here in the metro and tier 2 cities but we have not done enough in tier 3 cities or villages. We need to do that. Any particular sector where you see more activity happening which may be leading this phase of uptick in growth? Infrastructure is an area where we are seeing a lot of growth and demand. So, obviously, that augurs well and this also means that the country is growing in the right direction. That is something which looks positive and we are seeing growth there. Why is the level of insurance penetration not increasing? We are not creating new markets. We are still fighting in the same markets today. Companies are present in metros and tier 1 cities but if you go to very smaller towns or villages, they are not there…maybe the cost of having an establishment, or the premium figures may not be as big as you get in a branch here (metros or tier 1 cities). That is really pushing back people from doing it probably. Unless the insurance industry starts distributing it (products) to the last man in the country, I don't think penetration levels will go up. Penetration levels have to go up. We are abysmally low. Do you see scope for a war insurance cover? We had spoken to insurance companies and brokers that if somebody wants additional cover, we are willing to look at it. Basically, the normal traditional cover, especially in property and other products, do not cover war or war-like situations. It is completely excluded. I was waiting to see if somebody, especially close to the border, would be interested in a war cover. But I realised that the time frame was small, and also people would have realised that looking for a cover then would mean that it is very expensive. The event happening and you ask for a cover, people obviously charge a very high price. Going forward, maybe people will start thinking about this cover. So, we look at it positively. This is another area of insurance that can come up. So, we are ready for that, in case people want that. Why have health insurance premiums shot up in the last two years? The issue is higher claims. And yes, we are also worried about it and are pushing hard. It is an unregulated industry. Hospitals, unfortunately, don't have a regulator. When you go to a hospital, the first question they ask is whether you have a policy. The moment you say yes, the treatment that you get will be the same but the cost will go up by a factor of something. This, according to me, is not legitimate. Whether I am insured or I am paying from my pocket, the cost of the service cannot go up. It has to remain the same. This is something that needs to change. The insurance industry is trying to control the cost. They are trying to control and see whether one is being subjected to tests that they don't need for the problem that they have gone for (in a hospital). There is a lot of resistance from the hospitals. There are complaints that people have to pay money upfront for treatment at the hospital. If everyone is regulated, why not healthcare also? The general insurance and life insurance councils have approached the government. They are seriously in talks with them and something should happen, I am sure. Why is there no catastrophe insurance scheme for the entire country? Hopefully, it will come sooner. We are discussing this with the government. We are obviously in the business of taking catastrophe risks. We understand how it is changing, in terms of frequency and severity going up. When a catastrophe happens in India, about 8-12 per cent is the insured loss, depending on where it hits. The rest is completely uninsured, which is the problem area for us. Most of the time, these are people who cannot afford and take the brunt of the shock. Once the event has happened, they depend on the government for doles. So, we have been in talks with the government saying, rather than doing that (offering doles), take a cover, pay for it yourself because other people just can't afford it. So whatever budget you have, you use it to pay the premium. And then once the event happens, let the insurance and reinsurance take over. This will work well according to me because once the insurance industry gets in, they will also start looking at ways to reduce losses. We are also looking at doing it in a slightly different way other than the traditional method. We are proposing what is known as parametric insurance, which is not traditional. It is based on certain triggers being met. So if I say that in a day 200 mm of rain happens, then you get the claim. I don't even send somebody to see whether you have suffered a loss. You are in that policy, you get it (claim amount). This will help the government also as they know that immediately there is a relief going to the people who have suffered. The Insurance Amendment Bill is awaited. The government has allowed 100 per cent FDI. What will be the impact on general insurance and on the reinsurers? For reinsurance, it makes no difference because any way you can have a 100 per cent branch. All foreign re-insurance branches (FRBs), such as Munich Re and Swiss Re are 100 per cent owned, they don't have any local partnership. On the insurance side, I am a little doubtful. First of all, when it moved from 49 per cent to 74 per cent, we didn't see a major take-up by foreign players, saying we would come to 74 per cent. My personal feeling is that you need to have a local partner in a market like India. You need to have a great distribution network. I think a strong local partner will always help. The local partners are the ones who are driving it. The foreign partner can bring in global best practices, best products, right pricing strategies and insurance knowledge. How are you dealing with scams in the agriculture sector? The insurance company on ground has to be very strong. For us, as a reinsurer, we try to see how strong they are, how they are able to manage the scheme, do they understand what they are doing, and the pricing. Unfortunately, today in agriculture, pricing has been horrible because new schemes have come up. Currently, the most popular scheme is the 80-110 scheme, where your risk coverage or your risk transfer is only 30 per cent. You give a cover and in case your losses are below 80 per cent, the balance you repay back to the government. If the losses go beyond 110, the government steps in and pays the losses. So really the risk transfer is only 30 per cent. As far as we are concerned, I don't think that's the way insurance should work. Secondly, fortunately for us, when it is the 80-110 scheme, most companies don't come for reinsurance support at all because they know their losses are capped, they don't need reinsurance. As a result of all these, the pricing is horrible, and at that pricing we will never write, that's very clear. Why talk only about agriculture? For the insurance industry, the biggest problem is fraud – whether it is health or motor or agriculture. The General Insurance Council is now pushing hard. They are trying to get the companies together. The IRDAI came out with this concept of Bima Sugam – a platform where everybody shares the data on insurance. So you know whether there is any fraud. I think initiatives are coming out but the market is still at a stage where a lot of things need to be done. Why did the growth in the insurance sector decline in FY25? Typically, the industry has gone 12-13 per cent year on year. This year (FY25) it was 6.2 per cent. Two reasons – one, I would say is the fact that there was a change in the accounting. So, earlier long-term products, such as housing and motor, were accounted for the year they were taken. Now the Insurance Regulatory and Development Authority of India (IRDAI) has said it must be accounted for the number of years that it has to go through. For example, matching with your 15-year housing loan, if you take a 15-year home insurance product, then it needs to be accounted for over 15 years. So obviously, this being the first year, there was an immediate impact. Second, I would say that the premium in the property class of business fell last year, which we are hoping to correct this year. How do you see prices this year? This year, prices should hold up. So as reinsurers, we have also put in place different ways by which to control the prices from falling too much. We need to understand the market well. Sometimes people tend to take decisions without going through the entire gamut. Property is about 8 per cent of the total portfolio. So, for a company which is writing probably 35 per cent of its business in health and another 30 per cent in motor, compromising a little on that 8 per cent may not seem too big, but overall, the big losses that we expect here, we need to ensure that it is priced. India is that way a cat-prone country. Every year we have some kind of event happening. Climate change is a reality today. The kind of losses that we used to see previously, the frequency has gone up, severity has gone up tremendously. With all that, we need to ensure that the prices match up to those losses or at least to those risks we are taking… at least you have to provide. When the loss happens, you should have some buffer to pay out. Do you think a concept like sharing credit score should be implemented in the insurance industry? There have been some discussions at the General Insurance Council level that claims and the so-called frauds need to be reflected in a person's CIBIL (credit) score also. So it is not just about you missing out on an EMI payment, it is also about the fact that if you have done something fraudulently, it should hit you on your CIBIL (credit) score. Your investment income grew by 4.5 per cent in FY25. What was the reason for the slower growth? Typically, about 73 per cent of my book is debt, which is normally government securities or AAA-rated bonds. Close to 17 per cent is equity on a book value. Nearly 8 per cent is money market, which is FDs or liquid mutual funds, and about one per cent is alternative funds. This year (FY25), markets were pretty volatile and at some points, they fell drastically. We used those opportunities to buy. In FY25, the profit on sale of investments was comparatively lower. This is the reason you see the growth is only about 4 per cent. Your premium from the international business has come down in FY25. What do you attribute this to? The growth (in international business) has started. You need to have a very good credit rating to underwrite international business. Going forward, we will be growing our international book along with our domestic book. The growth will happen typically 10 per cent year on year. Currently, our domestic book is 75 per cent and 25 is international. We would like it to be 50-50 at some point. But in the short to medium term, it will remain where it is because internationally, economies are not doing well. We don't see growth. How about investment in new projects? Is it taking off? It is definitely taking off. Investments from private promoters and from the government in areas such as highways, bridges and metros, are definitely happening. People are happily focusing on the Environment, Social and Governance (ESG) side, and so a lot of investments are happening on wind and solar farms, which is very encouraging.
Indian Express
5 days ago
- Business
- Indian Express
Post Operation Sindoor, we're looking at war insurance cover, says GIC Re Chairman
Operation Sindoor and the increasing use of drones in recent warfares has led insurance companies to explore the possibility of launching war insurance cover for corporates and people in border states to safeguard their investments in projects and lives there. The industry is also willing to create an insurance pool to cover defence assets provided the government gives a guarantee for the purpose, said Ramaswamy Narayanan, Chairman and Managing Director of General Insurance Corporation of India (GIC Re), the largest reinsurer in the country. Narayanan said every insurer and reinsurer will be more than willing to write the insurance cover. 'Some part of it they can retain, they can reinsure with us, we will have our own capacities for that,' he said in an interview to The Indian Express. Stating that going forward, people may start thinking about this cover, he said, 'If you see Rajasthan and Gujarat, there are some big investments and people who have put in those investments could be worried. There could be pressure from lenders as well as damages can happen. In a traditional cover, war is not covered and so you will need to possibly buy a war cover. So there could be demand,' he said. He said that he was waiting to see if somebody, especially those close to the border, would be interested in a war cover. 'I, however, realised that the time frame was small, and also people would have thought that looking for a cover when the event was ongoing would mean that it would be very expensive,' Narayanan said. When asked if anything changed due to the India-Pak conflict, Narayanan said nothing changed because it was too brief to make a difference. 'I was actually waiting and we had spoken to insurance companies and brokers that if somebody wants additional cover, we are willing to look at it,' he said adding that 'drone attacks have become a big challenge and it has been seen both in the recent conflict between India and Pakistan as well as the ongoing Ukraine-Russia war.' GIC Re Chairman said that while defence establishments in India are not insured, the industry can look to provide it just like it was done for nuclear facilities. 'Traditionally, it has never happened. I don't think even globally that is happening…. We could try, but the investments are huge. We need to have that capacity. We can manage it provided the government gives its guarantee. You charge a premium and you put it into the pool, and if for five years there are no losses, we can use the pool to pay as we would have created a kitty by then. However, if the loss happens in three months, then the pool is not enough and in that case, the government will have to say that their guarantee is there, and they will pay it off. If that kind of a thing is there, we know how to manage it for the government,' he said. He said that normally, when insurers cover and reinsurers back up, they would want to inspect the facility and see the risk management features before giving a price and a cover, but then the government will not want their facilities to be inspected by someone. It happened in nuclear (facilities). 'It was not covered and the government had kept it to themselves, and then later they asked us to issue a policy. We then scouted internationally for support because the cover was big. They (international partners) said that without an inspection they cannot do it (issue policy) and they would need to inspect (nuclear) facilities. We told this to the government, and they said no to it as it was a security issue. How can anybody inspect our nuclear facilities? So, then we created a pool with us and others putting their net capacities and issued a policy,' he said. He said the nuclear pool is small because it is only the government properties which are being insured. 'But now there is a demand, so we are looking into it (for expansion). In the budget, the finance minister also made an announcement about allowing private operators. We are still waiting for the fine print to come, in terms of how it will work. Once it comes, we will open up the pool for private operators also,' Narayanan said. 'If they are open to having their facilities inspected, I am sure there should be enough reinsurers to provide capacity. But if they want to keep it closed to scrutiny, then we can use the pool,' he said. On the impact of the Ukraine-Russia war, the GIC chairman said that the fallout was a sanction on Russia, which meant that getting products from Russia insured was a problem. 'We created a pool (currently around Rs 470 crore) by which we are providing capacity. So Russian crudes get insured under the pool. Then there are project cargo coming from Russia which gets insured under the pool. But there is a demand. Reliance Industries has been asking us to increase capacity because now they are importing more crude from Russia,' Narayanan said.
