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INDIAN INSURANCE INDUSTRYINDIAN INSURANCE INDUSTRY2001-022001-02
D. SENGUPTAD. SENGUPTACHAIRMAN
GENERAL INSURANCE CORPORATION OF INDIA
The Indian general insurance business has been in the Government sector since 1973 and transacted by GIC and its four wholly owned subsidiary companies.
In consonance with Government’s commitment to WTO, in 1999 the insurance industry is opened up to private sector insurance companies with foreign partners
Opening up of Indian Insurance Industry
Opening up of Indian Insurance Industry
India is the world’s largest democracy with population of over 1 billion in 2000. It is a member of the Commonwealth. It is a Union of States comprising 28 States and 4 Union Territories.
About 28% population is urbanDespite changes in ruling parties, the country remained democratic with an elected government since independence in 1947The Per Capita Gross Domestic Product is approx. US$ 350 The per capita general insurance premium is Rs. 98 (US$ 2.09)Economic Growth Rate is approximately 6.1%Inflation rate is 5.4% (Aug-2001)
Exchange rate : US$ is Rupees 47.10 (Aug-2001)
India - factsIndia - facts
• Prior to 1999 Government owned GIC was acting as holding company and reinsurer
• Four GIC-owned companies carrying out all the non-life insurance business in the country.
• The four companies have a net work of 4127 Offices spread all over the country. They also have branch offices and/or joint venture operations in 30 foreign countries.
• Gross Direct Premium as at 31-Mar-2001 is Rs. 97998 Million which is approximately US $ 2085 Million
Insurance IndustryInsurance Industry
Fire Cargo Hull Motor Aviation Engineering
OtherMisc
Premium 23122 7651 2299 34174 1844 6738 19388Claims 10769 4833 2687 41720 2924 4203 12886LossRatio
46.6% 63.2% 116.9% 122.1% 158.6% 62.4% 66.5%
Premium 61042
Claims 38302LossRatio
62.7%
All ClassesExcluding.
Motor
Indian Non-Life business - Premiums and Claims ratios
Figures in Rs. Million
Year : 1999-00
Insurance IndustryInsurance Industry
• A large portion of general insurance business is Tariff controlled.
• Fire, Motor and Engineering classes are fully tariff controlled. Marine Hull major fleets are Tariff rated. Some part of Marine Cargo business is also tariffed.
• 20% of the premium written by the direct companies is ceded to the GIC as Obligatory Cessions.
• Around 89% of the premium was retained within the country and 11% is ceded outside the country.
Insurance IndustryInsurance Industry
• Reinsurance premium ceded out is mainly in respect of Excess of Loss protections and proportional premium in respect of Fire/IAR Peak Risks, large engineering construction projects, Marine Hull- super tankers, Oil cargo shipments and Aviation-airline fleet risks.
• Largest valued fire risk is an oil refinery with a PML of Rs. 23000 Million (Approx. US$ 490 Million).
Insurance IndustryInsurance Industry
• Life insurance business was transacted by the state owned Life Insurance Corporation of India with branch and agency net-work all over the country.
• Total life premium in the country for the financial year 2000-01 is Rs. 348.77 Billion which is approximately US $ 7.42 million. It is estimated that for 2001-02 it would be Rs. 480 Billion ($ 10.20 Billion)..
Insurance IndustryInsurance Industry
• In 1999 the Insurance ReguIatory and Development Authority (IRDA) Act was enacted and an authority (the Regulator) to control, regulate and enable development of insurance industry namely the IRDA was set up.
• Insurance companies in the private sector are allowed both in Life and Non-Life categories but composite companies are not permitted.
Insurance IndustryInsurance Industry
The requirements for private sector Insurance Companies are
• Minimum share capital of Rs. 1000 Million (US$ 21.25 Million approx)
• Foreign joint-venture partners if any, are allowed to hold a maximum of 26% of the share capital.
• GIC appointed as the “Indian Reinsurer” with exclusively reinsurance function and corollary functions.
Insurance IndustryInsurance Industry
• The Industry today
Today in addition to the four existing public-sector general insurance companies, six private insurance companies have been licensed to function.
Most of them have started functioning from the beginning of this financial year. Following Tables show details
Insurance IndustryInsurance Industry
Non Life Insurance companies
Insurance IndustryInsurance Industry
Name of the company, and Head Office Partner
1 Tata-AIG General Insurance Co. Ltd,Mumbai
AIG
2 Royal Sundaram Alliance InsuranceCo. Ltd, Chennai
Royal & Sun Alliance, UK
3 IFFCO Tokio General Insurance Co.Ltd.. Gurgaon near Delhi.
Tokio Marine, Japan
4 Bajaj Allianz General Insurance Co.Ltd. Pune.
Allianz, Germany
5 ICICI Lombard General InsuranceCompany Ltd. Mumbai.
Lombard group,Canada
6 Reliance General Insurance CompanyLtd. Mumbai
NO Partner
7 National Insurance Company Ltd. 100% Government owned
8 New India Assurance Company Ltd. 100% Government owned
9 Oriental Insurance Company Ltd. 100% Government owned
10 United Indial Insurance Company Ltd. 100% Government owned
Insurance IndustryInsurance IndustryLife Insurance companies
Name of the companyand Head Office
Partner
1. Life Insurance Corpn. Of India 100% government owned2. Tata-AIG Life Insurance Co. Ltd,
MumbaiAIG
3. Bajaj Allianz Life Insurance Co. Ltd.Pune.
Allianz, Germany
4. ICICI Prudential Life InsuranceCompany Ltd. Mumbai.
Prudential
5. OM Kotak Mahindra Life InsuranceCo. Ltd, Mumbai
Old Mutual of South Africa
6. HDFC Standard Life Insurance Standard Life, UK7. Max India Ltd New York Life, USA8. Birla Sun Life Insurance Sun Life, Canada9. SBI Life Insurance Cardiff, France10. ING Vysya Life Insurance ING, Netherlands11. CGNU Dabur Life Insurance CGNU, UK12. Hero PNB Zurich Life Zurich Life, Switzerland13. Sahara India Life Insurance No Partner14. Reliance Life Insurance No Partner
Insurance IndustryInsurance Industry
Credit Insurance companies
Name of the company, and HeadOffice
Partner
Export Credit GuaranteeCorporation, Mumbai
100% Government owned
New India Assurance Company Gerling global, Germany
Insurance IndustryInsurance Industry
Other Insurance related institutions`
Name Function
1 Indian Register of Shipping Marine Hull ClassificationSociety
2 Tariff Advisory Committee Insurance tariff authority
3 Loss Prevention Association ofIndia
Loss minimisation andconsumer education
4 Actuarial Society of India Actuarial
5 Insurance Institute of India Insurance Examination anddiplomas
6 National Insurance Academy, Pune Premier insuranceeducation
7 College of Insurance Insurance education
8 Loss Adjusters Association Loss adjusters
Following the IRDA Act, GIC is nominated as the “Indian Reinsurer”. Salient features
• Receiving Obligatory Cessions from all non-life insurance companies
• Organise and manage Market Pools and arrange for their excess of loss protection
• Accept treaty and facultative business from Indian companies.
• Collect, Analyse and Present Indian and International Insurance Data and Trend Analysis.
• Develop automatic capacity for products and lines of business, including new ones to be introduced
GIC of IndiaGIC of India
GIC as the International Reinsurer• GIC has been accepting foreign inward
reinsurance for 25 years now and has built up strong long-standing relationship with major international reinsurers such as Axa, SCOR, Partner Re, La Reunion, Lloyd’s Syndicates, Munich Re, Swiss Re and Zurich Re.
• Budgeted income from foreign inward business for 2001-02 is US $ 200 Million.
• Capacity offered by GIC USD 50 mln on facultative risks and USD
10 mln for treaties• GIC rated ‘A’ by AM Best
GIC of IndiaGIC of India
GlC - A TRUSTED SECURITYGlC - A TRUSTED SECURITY
393.1
187.9
62.8
31.1
131.5
81.7
121.2
115.6
42.4
189.4
0 100 200 300 400 500
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
393.1
187.9
62.8
31.1
131.5
81.7
121.2
115.6
42.4
189.4
0 100 200 300 400 500
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
S & P Standard < 330%
S & P Standard < 330%
TEST 1 : NET PREMIUM/ ADJUSTED
SHAREHOLDERS FUNDS
TEST 1 : NET PREMIUM/ ADJUSTED
SHAREHOLDERS FUNDS
…measures a company’s overall underwriting exposure in relation to its capital base.
Low exposure to shareholder funds-
Under-utilised Capacity
Global Market : Where we stand?Global Market : Where we stand?
TEST 2 : CHANGE IN
NET PREMIUM
TEST 2 : CHANGE IN
NET PREMIUM
S & P Standard : Between
(- 10% ) and (+ 30%)
S & P Standard : Between
(- 10% ) and (+ 30%)
…...seeks to monitor the rate of change of exposure indicating need for capital backing
6.6
14.0
6.7
-12.2
5.5
-13.8
6.0
25.7
10.3
-3.8
-20 -10 0 10 20 30
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
6.6
14.0
6.7
-12.2
5.5
-13.8
6.0
25.7
10.3
-3.8
-20 -10 0 10 20 30
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
Low exposure, no extra capital requirement
Global Market : Where we stand?Global Market : Where we stand?
TEST 3 : REINSURANCE CEDED/GROSS
PREMIUM
TEST 3 : REINSURANCE CEDED/GROSS
PREMIUM
S & P Standard :
Greater than 50%
S & P Standard :
Greater than 50%
……measures the extent of dependence on reinsurance/ retrocessions.
34.2
41.4
31.8
33.6
7.1
43.7
9.0
8.4
29.3
31.3
0 10 20 30 40 50
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
34.2
41.4
31.8
33.6
7.1
43.7
9.0
8.4
29.3
31.3
0 10 20 30 40 50
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
Low dependence on reinsurers indicating sound financials and
retention capacity
Global Market : Where we stand?Global Market : Where we stand?
S & P Standard : < 105%
S & P Standard : < 105%
TEST 4 : TECHNICAL RESERVES
/ADJUSTED LIQUID ASSETS
TEST 4 : TECHNICAL RESERVES
/ADJUSTED LIQUID ASSETS
…..assess the adequacy of the
company’s liquidity in relation to its
technical insurance liabilities and
ability to respond to heavy cash calls
117.7
47.2
58.9
50.1
65.5
114.5
71.6
52.0
62.6
84.3
0 50 100 150
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
117.7
47.2
58.9
50.1
65.5
114.5
71.6
52.0
62.6
84.3
0 50 100 150
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
Highly liquid and enough financial
strength to support the fresh risks
Global Market : Where we stand?Global Market : Where we stand?
…..where a company has a
lower level of return on its underwriting operation so that it
retains less than 75% of its
investment income after paying
underwriting losses, it will tend to have
difficulty maintaining the real value of its capital
base
S & P Standard : > -25%S & P Standard : > -25%
97.9
-35.4
12.7
-71.4
2.7
9.6
81.1
17.9
82.0
-70.1
-100 -50 0 50 100 150
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
TEST 5 : TWO YEAR UNDERWRITING PROFIT/ INVESTMENT INCOME RATIO
TEST 5 : TWO YEAR UNDERWRITING PROFIT/ INVESTMENT INCOME RATIO
Matter of concern, however relates to only
recent years of domestic catastrophic
losses
Global Market : Where we stand?Global Market : Where we stand?
….this is the familiar
“return on equity” ratio.
S & P Standard : Greater than 5%S & P Standard : Greater than 5%
TEST 6 : PRETAX PROFITS/AVG.
ADJUSTED SHAREHOLDERS
FUNDS
TEST 6 : PRETAX PROFITS/AVG.
ADJUSTED SHAREHOLDERS
FUNDS
7.3
21.5
17.8
6.8
32.2
5.9
37.6
24.2
4.6
6.0
0 10 20 30 40
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
Comparable with world class reinsurers
Global Market : Where we stand?Global Market : Where we stand?
….the purpose of this test is to
identify companies which may be in total under-reserved
and/or undercapitalised.
S & P Standard : > 150%
S & P Standard : > 150%
TEST 7: TECH. RESERVES+ADJ. SHAREHOLDERS FUNDS/NET PREMIUM
TEST 7: TECH. RESERVES+ADJ. SHAREHOLDERS FUNDS/NET PREMIUM
380.6
410.4
313.9
304.0
315.8
173.8
587.0
431.7
143.2
93.3
0 100 200 300 400 500 600 700
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
Adequate reserves and capital, can offer more capacity
Global Market : Where we stand?Global Market : Where we stand?
….this test measures the scale of the company’s reserves in
relation to the size of its
trading base.
S & P Standard : < 350%
S & P Standard : < 350%
TEST 8 : TECHNICAL RESERVES/ADJUSTED SHAREHOLDERS FUNDS
TEST 8 : TECHNICAL RESERVES/ADJUSTED SHAREHOLDERS FUNDS
620.7
73.9
262.7
268.5
157.9
128.7
82.6
171.0
169.0
266.7
0 100 200 300 400 500 600 700
Korean Re
Central Re
Egypt Re
Singapore
African
Malaysian
Munich
Swiss Re
Tokio
GIC
Low exposure compared to the asset
base indicating unutilised capacity
• GIC intends to expand the foreign inward operations and emerge as an international professional reinsurer. The targeted thrust areas are the Far-East Asia, South Asia, the Middle East and Africa.
• GIC has opened a representative office in London in 2001 and intends to open further offices in Moscow, Jeddah and Dubai.
• GIC has joint venture partners in Singapore (India International) and Malaysia (United Oriental insurance Co) and Kenya (KenIndia Insurance Co., Nairobi),
GIC of IndiaGIC of India
GIC of IndiaGIC of India
YEAR, not periodic
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
50000
40000
30000
20000
10000
0
GICGP
PREDGPGD