Govt unlikely to privatise GIC Re at this stage: CMD Ramaswamy Narayanan

Chairman and Managing Director of General Insurance Corporation of India (GIC Re) Ramaswamy Narayanan expects the stake sale of about 10 per cent in the public sector reinsurer to begin after the general elections. In an interview with Harsh Kumar, Narayanan says the company’s business from Gift City will substantially increase in the coming days. Edited excerpts:

 Do you think the complete privatisation of GIC Re can happen in the future?

Whether the government would be open to privatising us, my take is no, simply because we are the only public sector company in this sector, currently. We don't even have any other Indian reinsurers in the market. The insurance market is slated to grow at double digits for the next two decades. If that is the case, you need strong reinsurance to take care of the business in this market to ensure that insurance companies have a lot of capacities available to them. I don't think they would want to privatise GIC Re at this stage. They could at a later stage, reduce the (government’s) share, but I don't think at any point in the immediate future, they will bring down the stake to anything below 51 per cent.

What kind of response did you get from the GIC Re roadshows? When can expect the stake sale of around 10 per cent?

The response was very encouraging. We never went for a deal roadshow, it was a non-deal roadshow. Though, people had an inkling of what was happening. We met with big investors and analysts. DIPAM officials were with us as well, apart from my own colleagues from GIC Re.

Overall it was in two legs — Asia; and the US and the UK. We had done a similar thing in Mumbai in October 2023, after which people started tracking us as a stock. They understood the story that we had to offer, and the kind of changes that were happening in the company’s performance and the profitability. By when the stake sale of 10 per cent will happen is still not known. Because, one, by the time we came back, the election dates were kind of finalised. So, basically, nothing can happen now, till the elections are over. It is post-election that the activity will start. It's a call for the government to take more than us.

Which market GIC Re is focusing on in FY25?

In FY25, more focus will be on the Indian market. Basically, when you look at the reinsurance business, it happens in relatively big chunks. For instance, a major part of the international market, the treaties renew on January 1 (of the calendar year), and January 1 of 2024 is gone. We kind of wrote almost the same business that we wrote last year as well. We didn't increase simply because we wanted to wait for our credit rating to improve before we actually went out for higher business in the International market. But on the domestic front, we have done substantially well. We've tried to find out which areas the Indian market is looking for support, and where they want GIC Re to partner with them. And we have supported them well. So, if you really look at my business book, around 30 per cent is my international book and 70 per cent is my domestic book.

What is your take on privatisation of banks and insurance companies?

There are two issues with this. Let’s understand from the listing perspective, like what happened in the case of GIC Re and New India Assurance. It's a great thing to happen, simply because it adds a lot of discipline to the way we are working. Earlier, we used to be just a government company, today we have minority shareholders. You start thinking about them, you start thinking about what investors expect from you. And, you definitely become more disciplined in the way you do business. So, the way I look at it, the listing is definitely a plus.

Now coming to privatisation where the government would possibly sell off 100 per cent of a (public sector) company, something that they did with Air India, for instance. It's a great initiative. What the government essentially wants to do is have representation in each kind of sector. So, in case you're looking at an insurance company, they would want to have one or two insurance companies. Similarly, in the case of banks, they would possibly want to own three or four banks and the rest can be privatised. This is my take.

How’s GIFT City treating you?

We are writing some parts of the business from GIFT City. So, earlier we used to write a few of the Central European businesses from there. Now, we have shifted our business from West Asia to that branch. We used to have a branch in Dubai. That business will be written out of Gift City going forward. The amount of business that we write from GIFT City will increase. We have taken a bigger unit there. We will be having more people in order to write the business from that unit.

The Insurance Regulatory and Development Authority (Irdai) is planning to introduce collaterals for reinsurance transactions with Cross Border Reinsurers (CBR). How will this benefit the Indian insurance market?

We have three categories of reinsurance in India today - the Indian reinsurer, the foreign reinsurance branches and the cross-border reinsurance. The third category is a set of reinsurers who do not have any presence in the Indian market, but do business in the Indian market. Today, any reinsurer situated anywhere in the world can write business with any insurance company, as long as they have a File Reference Number (FRN) from Irdai.

Irdai now wants more commitment, more stickiness from reinsurers. They are also concerned about the fact that in case there are reinsurers who refuse to honour claims, what kind of security Irdai has with them to ensure that the claim gets paid? That is where the (concept of) collateral is coming (from). For the business that they write in this country; they will have to provide some kind of collateral.

This is not anything new in the reinsurance market. Collaterals are still there in very many markets. For instance, when GIC Re writes business in the US, we have to provide collateral because we don't have a presence in that country. Irdai wants to bring it to the market in 2025.