Global reinsurers face challenges as they seek growth in India
Global reinsurers are piling into India in search for growth. A number of foreign reinsurers have recently received approval to open a branch in India. The list includes Swiss Re, Munich Re, Lloyd’s, Hannover Re and XL Catlin.
Reinsurers are excited about India because of the insurance growth potential they see for the country. Drivers for growth are the bright economic outlook on the one side and a low insurance penetration on the other.
However, this is likely to increase competition in an already soft market, according to experts speaking to Intelligent Insurer.
After latest regulation prioritized foreign reinsurers with branches in India, the country’s market is likely to become more competitive, driven by a flurry of global players setting up domestic offices.
“As more reinsurers set up branches, competition in India will grow,” Michael Marx, managing director Asia Pacific at Hannover Re, said.
“It’s just a matter of time until the right of first refusal will be weakened or scrapped [...] competition will become similarly intense as in other Asian markets.”
Marx also believes that at some point the so-called cross-border reinsurers, which are not locally registered, will be able to write business in the same way as they did in the past.
Higher competition comes as India, similarly to other parts of the world, is experiencing a period of low rates.
The soft market is the main challenge for reinsurers to grow in India, said Brendan Plessis, head of emerging markets of XL Catlin. But there may be more.
One potential issue is that the primary insurance market is currently operating in a challenging underwriting environment.
“Right now the domestic insurance results are not that great, registering combined ratios in excess of 100 percent,” Marx said. “This creates a challenge for reinsurance in India.”
In addition, Marx believes that capital requirements for insurers in India are likely to rise, further constraining primary insurers’ ability to grow the business. Also, finding the right staff in India to grow the reinsurance business is unlikely to be easy, especially as more players enter the market, he notes.
Despite the short-term challenges, the reinsurance industry is convinced that the potential of the market is real.
“Crop insurance and health insurance will be the major drivers for the industry growth in India this year,” said Kalpana Sampat, the new CEO of Swiss Re’s India branch.
Hitesh Kotak, the new CEO of Munich Re’s branch in India, added: “We certainly see India as one of the high primary growth markets with future growth potential across all segments of insurance.
“The growing Indian market is an important pillar in our strategy.”
This is just a snapshot of a wider story. If you want to find out more about why giants like Swiss Re and Hannover Re believe that India will be a major driver for growth, please click here.
Did you enjoy reading this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
