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The reinsurance segment in India is likely to see heightened action in the next few months with not only international reinsurers, but also domestic entities planning to enter the reinsurance space.
The Insurance Laws (Amendment) Bill passed by both the Houses of Parliament allows foreign entities to enter India and establish branch operations here. Experts say this will be a win-win for customers with better pricing, product design and servising.
According to the Insurance Bill, global reinsurers can open branches in India. In its definition of an insurance company, the Bill has also made a special mention of global specialist insurer Lloyd’s.
“Earlier, they (reinsurance companies) were allowed to operate only through a joint venture with 26 per cent cap on foreign direct investment. But the new Bill will help reinsurance business evolve as more experienced reinsurance companies come as a foreign branches,” said Shashwat Sharma, partner (management consulting) at KPMG in India.
For customers, this would mean better pricing because the underwriter will be closer to the market and would understand the risks better. Further, better products suited for the market will also be offered based on global expertise.
This, according to insurers, would expand not just the reinsurance companies' presence in India, but also increase the scope of activities of reinsurance brokers. According to the Bill, foreign reinsurance companies are allowed to engage in re-insurance business in India directly or through branch offices pursuant to registration with the Insurance Regulatory and Development Authority of India (Irdai).
Insurance Bill
According to John Nelson, chairman of Lloyd’s, the passage of the insurance Bill is great news for Lloyd’s. “We are grateful to the Indian government and authorities for their support in reaching this point and look forward to working together as the legislation is implemented,” he said.
At present, General Insurance Corporation of India (GIC Re) is the sole domestic reinsurer. While Irdai encourages insurers to retain higher percentage of reinsurance business in India, foreign reinsurers also have representative offices in India and they underwrite part of large risks emanating from India. Regulatory officials say large global reinsurers have expressed interest to set up physical operations in India and they would look into the applications formally. However, the mandated retention of a portion of the risks in India would continue to be applied, they added.
Manohar Joshi-led Kohinoor Group has also applied for a reinsurance licence and, if granted, it will be the first non-government reinsurer in India.
Anuraag Sunder, managing consultant at PwC India, is of the opinion that India could become the nerve centre of analytics.
