23 October 2017Insurance

More growth ahead: GIC Re

Indian reinsurer GIC Re is preparing to launch an IPO. Chairman-cum-managing director Alice G Vaidyan explains the reasons behind it and the company’s plans for the months ahead to Baden-Baden Today.

You are preparing to launch an IPO. What is the strategy and rationale behind this?
Far more accountability, visibility and transparency will be brought forth as far as the initial public offering (IPO) is concerned. Listing helps shareholders become participative and tap into the opportunities that in turn help further the expansion plans of a company.

GIC Re has already filed its preliminary prospectus with the market regulator the Securities and Exchange Board of India (SEBI) and is awaiting final approval. We have simultaneously commenced preliminary deliberations with domestic and international investors.

How might this change your approach and strategic direction?
We will have more liberty going forward to raise capital in order to fund our growth objectives as it is mandatory to have a minimum of 25 percent floating stock in the market over a three-year period, this being a SEBI stipulation.

With the addition of public and institutional shareholders to the ecosystem of our stakeholders, there will be greater interaction with the investment community. This will lead to greater transparency and benchmarking of GIC Re’s performance.

How do you plan to seek growth in a soft market?
Our main thrust is towards diversification across product lines and geographies—segments such as agriculture, cyber, liability, and life will witness greater commitment. We would also be focusing on optimising and prioritising our client relationships, and being seen as a market-friendly reinsurer.

In which new geographies or product lines is GIC Re looking to grow?
Our growth plans include establishing a syndicate at Lloyd’s of London which will write a variety of classes of business from different parts of the world; expanding our relationships with insurers in the US and accepting more US-related risks; establishing representative offices in China; establishing a representative office in Brazil to expand our Latin American business; converting our Moscow representative office into a wholly-owned subsidiary and expanding our reinsurance business in Russia and CIS countries from Moscow; and establishing a strategic relationship for reinsurance business in Myanmar and establishing a representative office in Bangladesh.

We would continue with our focus on growth markets. In terms of product lines, we intend to grow our domestic health and liability business, and our overseas property, space and cybersecurity lines, besides life and agriculture business.

What growth opportunities do you see in North America/LatAm?
North America and Latin America remain priority focus areas for us. We have worked consistently in the last few years to tap into the ample growth opportunities that are offered by a market hitherto untapped by us. What makes Latin America attractive is that it has remarkable economic growth that has made the region an interesting and more stable business destination.

Regulatory reforms over the last decade have created a more business-friendly financial environment for the insurance industry which is conducive for our business to grow.

What are the regional challenges of doing business in North America/LatAm?
There are sharp regional variations in economic conditions and demand for insurance products in the North America/LatAm region so a ‘one size fits all’ approach is not suitable and one needs to have a more nuanced approach.

The challenge lies in handling the region’s heterogeneity. Each country is unique, and assessing its degree of attractiveness requires country-specific insurance market and economic outlook analyses. Latin America’s growth rates are substantial, but account for just under 4 percent of the world’s total insurance premiums. Moreover, insurance penetration—annual premiums over gross domestic product (GDP)—is very low compared with developed countries, so these are factors that present bright prospects for growth.

Annual premiums and interest in specific markets must be considered along with business indicators such as political stability, economic policy continuity and market risk factors.

Alice G Vaidyan is the chairman-cum-managing director of GIC Re. She can be contacted at: cmd@gicofindia.com

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