ICICI Lombard eyes credit insurance for growth

Though the Indian credit insurance market is in a nascent stage, it has huge potential for growth even as exports are on the rise and the domestic chemical, pharmaceutical, garments and software services industries are experiencing a boom time.

Kapil Singhal, head, structured products, ICICI Lombard General Insurance Company, said: "The Indian credit insurance market is in a nascent stage today. The estimated gross premiums excluding factoring transactions is at about Rs 150 crore which are largely controlled the Export Credit Guarantee Corporation of India. The private sector, of which ICICI Lombard is a leading player, is fast picking up marketshare with value-added features and strong re-insurers to back it up."

He added that credit insurance, though at a developmental stage, could become a substantial segment in general insurance in a couple of years, given the strong growth in exports and the untapped potential.

Credit insurance is largely taken by exporters who want to cover their open risk on the buyers in terms of payment risk and political risk. This product gives them the flexibility of expanding the export business without having to worry about non-payment risk.

This risk is passed on to the credit insurance companies who are best equipped to understand the same given their global affiliations and vast data bases on the buyers worldwide.

The Indian credit insurance market has been active in sectors like engineering goods, chemicals, textiles and service sector.

According to Singhal, the future of credit insurance is extremely encouraging and evolving as the Indian economy continues to report healthy exports growth rate.

Exports of merchandise goods stood at $63.5 billion for 2003-04 with a growth rate of 20 per cent over the previous year. The growth rate of exports in the last nine months has been higher at over 23 per cent.

The company garnered a premium income of Rs 215.22 crore for the 2002-03 financial year and has already made a premium income of Rs 566.17 crore in the period from April 2004 to November 2004.

Company officials said while credit insurance today accounts for less than ten per cent of the premium collection, this particular segment will grow at over 300 per cent every year.