Fierce competition but also great opportunity in Asia
It is targeting a top 10 reinsurance spot on a global basis, but the opportunities that exist in its home continent of Asia are not lost on Alice Vaidyan, chairman-cum-managing director of GIC Re.
What are GIC Re’s ambitions for expansion in Asia?
Asia has emerged as the driver of global economic growth since the recession of 2008/09. GIC Re is at the forefront of the reinsurance industry in Asia, having participated in and led many reinsurance programmes across the continent. Approximately 55 percent of our foreign business comes from Asia.
We would like our already significant presence in Asia to translate into leadership positions across all regions of the continent and all classes of business. Eventually, our ambition is to become the largest and most well-diversified reinsurance company in Asia. As far as targeting certain countries is concerned, we are very interested in the ASEAN and Chinese markets.
What are your aims and ambitions in your home market of India?
India is the fastest-growing major economy in the world. The IMF expects the Indian economy to grow at 7.4 percent in 2016-17. The demand for insurance and reinsurance solutions is also expected to grow in line with the growth of the real economy. GIC Re is an already established player in the Indian market having 50 percent of the share of reinsurance premiums underwritten in the country.
GIC Re is expected to maintain its leadership in the market in spite of the ensuing competition expected from foreign reinsurers. The insurance industry is expected to quadruple in size in the next 10 years indicating that there is ample scope for multiple reinsurers to operate in the country.
GIC Re will work with foreign players in expanding and deepening the market. Our intention is to continue providing support to local insurers and state initiatives—especially in agriculture and health—in the endeavour to expand the insurance coverage ambit and increase the extremely low insurance penetration levels in the country.
What are the main challenges of seeking growth in Asia?
The challenges in Asia are manifold: lack of awareness and financial literacy among the population, affordability of insurance products by poverty-stricken households, lack of legislative and institutional support in many countries, non-availability of quality data with underwriters, weak distribution channels and non-availability of customised financial products across geographically and culturally diverse regions of Asia.
However, these challenges can be overcome with the cooperation of all stakeholders and long strides have already been made in doing so.
Is bridging the protection gap the key to these markets?
Bridging the protection gap is vital for all Asian economies in their quest for financial inclusion and the creation of more egalitarian societies. The Indian government’s financial inclusion programmes relating to banking and micro-insurance through its national identification number project are notable examples of this.
The mortality and healthcare protection gaps in Asia are expected to widen to $82 trillion and $197 billion respectively by 2020. This puts immense pressure on individual savings and state institutions in order to meet the financial requirements in contingency situations. It is the need of the hour to bridge this gap by increasing outreach within the populace, establishing better delivery mechanisms, creating customised products, having more institutional support and forming public-private partnerships.
What is your timeframe on becoming a top 10 player globally?
We have been operating in the reinsurance space for only the last 16 years and managed to attain the 14th rank in this relatively short span of time. Considering our rapid growth in the Indian and Afro-Asian markets, we expect to become a global top 10 player soon.
What sets GIC Re apart from other reinsurers globally?
GIC Re is a well-capitalised reinsurer with deep knowledge and understanding of the Indian and Asian markets. Our technical expertise enables us to develop customised reinsurance solutions for every market and support the local insurers regardless of the prevailing market conditions. In addition, we are a central government-owned company, backed by a sovereign guarantee which instils immense confidence in our business partners across the globe.
What is your view on current market conditions?
There is immense competition among all the players in the market with pricing being the determining factor in the placement of reinsurance programmes. Apart from some localised events, we have not seen any large scale natural catastrophes affecting multiple geographies, which would have led to huge claims and a concomitant hardening of rates. This soft phase of the insurance cycle is expected to continue.
Alice Vaidyan is the chairman-cum-managing director of GIC Re. She can be contacted at: alice.vaidyan@gicofindia.com
