With the insurance law allowing foreign reinsurers to set up underwriting business in India, Hannover Re is betting big, especially in non-traditional sectors such as agriculture and health care. The world's third-largest reinsurance firm plans to team up with central and state governments on health insurance schemes and universal insurance coverage. Chairman and chief executive officer (CEO) Ulrich Wallin tells Arup Roychoudhury while its underwriting business in China will continue to be bigger than in India in absolute terms, the latter's relative growth is slated to be higher. Excerpts:
Global reinsurers are making a beeline for India. What are your plans? What numbers are we looking at in terms of branch offices, staff, underwriting business and focus sectors?
We are quite pleased with the new developments, which would allow reinsurers to set up branches in India and underwrite locally rather than cross-border. I had the privilege of meeting Mr Narendra Modi in Hannover earlier this year on the occasion of an industrial trade fair. At a CEO roundtable, the Prime Minister made us look at India and develop our business here.
Having branches is different from writing business from abroad, because if we write the business locally, we would also keep the reserves locally. The overall market size in India is probably a little more than $2 billion. For us, we write about $120-130 million. That compares to an overall premium income for Hannover Re of about $18 billion. In the Chinese market, we write close to $1 billion. So there is a lot of potential in the Indian market.
When you do a comparison of business in India and China, where do you see the size of your business five or 10 years from now?
The reinsurance industry in China benefited by opening up of the private sector and foreign companies. The same thing
could happen to India. For us, it's more like a 10-year horizon than a five year one. In the next five years, our aim is to go from $130 million of premiums that we write in India to a region of $500 million. In China, we write $1 billion, and we expect to grow further. However, as we come from a small base, we will see that the relative growth in India will outpace that in China.
Given India's track record with policy ambiguity and reversals, do you expect a problem, or do you think the guidelines that the insurance regulator is expected to come out with would clear all doubts?
I think the new government moved rather swiftly in introducing those laws after having being elected, and moved it forward faster than we would have expected. Of course, the details are yet to be ironed out. We are quite dependant on the emphasis of the new government to continue to push reforms forward.
Getting clarity is the main reason for this trip. We will meet the insurance regulator (Insurance Regulatory and Development Authority f India Chairman T S Vijayan) on Thursday. We will meet Finance Minister Arun Jaitley on Tuesday. We are also meeting Health Minister J P Nadda and officials from the Prime Minister's Office to discuss national health insurance schemes. We are trying to focus on non-traditional sectors like health and agriculture. There is a new customer base out there.
Speaking of health care and the national health insurance, we know the challenges that India has faced regarding universal health coverage, especially in rural areas. This financial year, the Centre cut its spending on health care, to focus more on infrastructure. What are your views on that and how do you see that affecting your prospects?
Until now, we see opportunities. The most important part is the efficiency of the system and this is what we are focusing on. It does help if a lot of money is being spent on health care, but it is not benefiting the patients, especially the poor. We focus on specialty areas as well. We are the largest partner of aviation reinsurance in India. We underwrite agriculture and energy business as well, where we have specific expertise.
Therefore, we are less hindered by the fierce competition that we see on some of the property covers. We see big prospects in India as an agriculture sector reinsurance market.
For the time being, we are seeing the state health systems as the major source of our income. Then, we have the national health system that we are progressively working with. For us it will be a mixture of both.
The government has announced universal insurance schemes. How much of that will you be underwriting?
We do see prospects there. We have offered companies reinsurance support, including public sector insurers like Life Insurance Corporation of India. Expect us and General Insurance Corporation of India, not many companies have come forward for that. A scheme like the Pradhan Mantri Suraksha Bima Yojana offers low price product. We believe that with volumes we can go for the price point. We can mitigate fraud and move forward with faster claims settlement.
Regarding some other government schemes, we are very keen to see how we can work with the Jan Dhan Yojana and offer entitlement-based benefits to marginal farmers and farm workers. We will offer them a choice of an insurance coverage which can guarantee good income from farming. We are keen to partner with the government at a technical level to see if there is a way for a company like ours to help overcoming the agriculture sector distress in India.
