Indian reinsurers shifting towards enhanced domestic capacity and innovation: J.B. Boda
November 7 2024 by InsuranceAsia News
The Indian reinsurance market has transformed significantly in recent years, evolving from GIC Re’s sole dominance before 2015 to a more competitive and sophisticated landscape with the increasing presence of foreign reinsurers (FRBs) and the growth of domestic insurance capacity, Rohit Boda told InsuranceAsia News (IAN).
“Insurers and reinsurers are adopting complex reinsurance structures, such as loss participation, sliding scale commissions, and event limits, commonly used in developed markets,” he said, adding that the insurance industry is gradually enhancing their risk retention capacity, as reflected in higher retentions on treaties and facultative business. This trend is driven by increased net worth and improved underwriting capabilities.
In terms of the use of foreign reinsurance capital, the industry has become less dependent on overseas reinsurers due to the growth of domestic reinsurance capacity, including GIC Re and FRBs. Besides, the prevalence of co-insurance arrangements among Indian insurers and regulatory support from the Insurance Regulatory and Development Authority of India (IRDAI) have further reduced the need for foreign reinsurance and instead maximised domestic retention.
Compared to prominent reinsurance hubs like Hong Kong and Singapore, which benefit from established infrastructure, a deep pool of reinsurance capital, and a favourable regulatory environment, India’s growing economy, large insurance market, and government initiatives position it to become a competitive player in the regional reinsurance landscape, said Boda.
Besides, initiatives such as the development of GIFT City as a reinsurance hub and the exploration of alternative risk transfer mechanisms will bolster the growth and position of the Indian reinsurance market as a preferred reinsurance market in Asia by attracting foreign reinsurers and fostering innovation, according to Boda.
P&C insurers in India are seeking reinsurance partners that can provide comprehensive support in several key areas.
“Capacity is a critical factor, especially given the increasing frequency and severity of nat cats and large infrastructure projects. Insurers need partners with the ability to cover high-risk exposures.
“Expertise in emerging risks like cyber liability, environmental hazards, and pandemic-related disruptions is essential. Reinsurers with specialised knowledge and experience in these areas can offer valuable insights and risk management strategies,” said Boda, adding that insurers in India also need partners who can support their expansion in both retail and commercial segments. ‘
This includes providing capacity for gross written premium (GWP) growth and risk management support to ensure sustainable growth.
“Capacity is a critical factor, especially given the increasing frequency and severity of nat cats and large infrastructure projects. Insurers need partners with the ability to cover high-risk exposures.” Rohit Boda, J.B. Boda
“Insurers are looking for partners who can offer predictive analytics, actuarial tools, and automation support to improve their decision-making and efficiency.”
Additionally, reinsurers with experience across various lines of business, such as motor, health and agriculture, can provide a more comprehensive range of solutions for insurers.
Knowledge of regulatory compliance and local market understanding are crucial, Boda added.
“Reinsurers with a deep understanding of Indian regulations and a strong local presence can ensure smooth operations and provide tailored solutions,” he said,
Boda noted that there is still room for improvement, particularly in enhanced data analytics, risk modelling refinement and climate change focus.
“By continuously seeking to improve and innovate, brokers can play an even more critical role in supporting the success of the reinsurance industry.”
Given the escalating frequency and severity of nat events, particularly floods, P&C insurers in India are increasingly focusing on risk modelling and catastrophe risk management, Boda said.
“This involves leveraging advanced analytics to assess vulnerabilities, identify high-risk zones, and implement mitigation strategies. Additionally, insurers are seeking to diversify their portfolios through strategic partnerships and reinsurance arrangements to spread risk and mitigate potential losses.”
Additionally, the growing prevalence of cyber threats, fuelled by digitalisation, has necessitated a significant shift in underwriting practices, with insurers investing in cyber risk expertise to assess vulnerabilities, develop robust risk mitigation strategies, and secure adequate reinsurance protection.
“This includes leveraging advanced analytics and threat intelligence to identify potential cyber exposures and quantify risks,” said Boda.
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