Speakers at the recent 8th India Rendezvous held in Mumbai spoke of a need for greater cooperation and closer networking for a strong and vibrant insurance industry in the SAARC region. Panellists also spoke about underwriting discipline and the setting up of a Nat CAT pool for the region.
In his welcome address, Mr Ashok Kumar Roy, Chairman-cum-Managing Director, GIC Re, assured the SAARC (South Asian Association for Regional Cooperation) markets that GIC Re would continue to provide leadership support to the region. “It has been GIC Re’s approach to support the SAARC region and we will always hold hands of all and move forward,” he said.
He highlighted how the central government’s major thrust on financial inclusion and manufacturing would energise the insurance industry in the country. “With the increase in FDI in insurance, we expect more players to set up shop and we welcome competition. The future of insurance is bright in India and with the new dispensation, it appears brighter,” he said.
Capital and growth the biggest two issues for reinsurers
Speaking on the changing dynamics in the world of reinsurance, Mr Vincent Foucart, Alternative Solutions Director, SCOR Global P&C, said that analysing the top public document words’ frequency show that capital and growth are by far the two biggest issues for reinsurers worldwide.
“Only three years ago, capital and growth were of a lesser concern but 2011 and 2013 were the respective turning points,” he said.
He spoke of how since the mid-2007, the industry has witnessed a growing number of shocks, be it financial, economic or political, leading to a temptation to strengthen regulations at global levels despite the proven track record of the insurance and reinsurance industry.
“The combination of softening operating conditions with prolonged low interest rates and depleting ‘reservoirs’ of potential positive developments of reserves, create an environment increasingly vulnerable to a large, cycle turning event,” said Mr Foucart. Emphasising the critical role of reinsurers, he said that by managing risks and absorbing shocks, they enable economic growth and support greater insurance penetration.
Opportune moment for world players to set up shop in India
“International reinsurers are key to India’s economy as they not only provide reinsurance cover but also bring in international best practices and technical knowledge to the market,” said Mr Vincent Vandendael, Director, International Markets, Lloyd’s. He spoke of the huge opportunities that exist in the Indian market as there existed a wide gulf between the potential of the Indian market and actual insurance penetration in the country.
Mrs Alice Vaidyan, General Manager, GIC Re, said financial inclusion was in the fast-forward mode in the Indian market today with the government keen to see that the banking and insurance services benefit all citizens across the country.
“With the amended Insurance Act, the time is now and it is up to the insurance industry to decide how they want to be relevant in this new India,” she said. She also emphasised the need for the industry to be innovative. “Our fundamental obligation is to understand, even anticipate the needs of our customers and effectively respond to those needs and that means innovating in our product development, service delivery and the process of underwriting itself,” she said.
She however felt that the typical nature of innovation, especially on the product side tends to be of the evolutionary or incremental type and what is lacking is the movement towards expansion of market penetration.
Asia to drive growth for life reinsurers
Mr David O’Sullivan, Head of Strategy & Operations, Asia, Life & Health, Swiss Re, said emerging Asia is forecasted to account for 25% of global life premiums increase between 2013 and 2020.
“Life insurance is changing from being concerned with the consequences of premature death, to those of extended life,” he said. He also said that to make the customer experiences better, companies should simplify and innovate product design, streamline the underwriting process, improve communication and consumer education, innovate with distribution and improve long-term relationships.
Stressing that customers should have outstanding experiences with the industry, he said: “Change the perception of the customer to one of ‘OUT’-surance instead of insurance,” he said, and for this, reinsurance can play a key part, especially in pricing, underwriting and claims to distribution channels.”
Make data a part of your business
Mr John Bissell, SVP, Global Operations, ACORD, spoke of how the data that flows through every business was critical for the system and process you run.
“Data is essential to insurers – to know their customer, risk, exposure, claims performance, outwards reinsurance needs, investment portfolio, channel performance, marketing results. India faces enormous opportunities as a fast-growing economy,” he said. “Now is the time to act! Ensure your foundations can support your opportunities and make data standards a part of your business.”
Effective risk management and CAT risks
Mr Jan P Mumenthaler, Principal Insurance Officer Asia, International Finance Corporation (IFC), spoke on the need for effective risk management in the wake of increasing natural catastrophes around the world. He mentioned the ever increasing gap between economic and insured losses that were happening in different regions worldwide.
“The increasing risks as a result of climate and developmental factors has an effect on insurers and risk managers,” he said. He asked companies to plan risk mitigation measures and also to have a risk retention strategy. “Move from emergency loans to pre-disaster financing and remove reliance on government as insurer of last resort,” he suggested.
Mr N Balasubramanian, Head of Claims, Property & Casualty, SID, Swiss Re, said that the South Asian region was witnessing more severe flooding events and quite regularly. He mentioned that eight out of 10 cities most at risk from natural perils worldwide are located in Asia. He spoke on how proper data will help in better models which will enhance the underwriting quality.
“Event claims warrant a different strategy and for this to happen, industry cooperation is the key. Adequately pricing the flood risk and increasing the pool of flood premium will bridge the gap,” he said.
India now
Mr Abhijeet Mhatre and Ms Gagneet Kaur, second year PGDM students from the National Insurance Academy (NIA), spoke of the huge potential in the Indian market.
“A growing middle class and technological advancements gives the nation an exceptional growth potential in the times to come. Long-term funding is required to finance the government’s social programmes, infrastructure as well as for the expansion of the industrial productivity,” they said.
They also emphasised the need for efficient channelling of savings by building an adept financial system that can be a good opportunity for the government to develop long-term savings instruments – pension, insurance and hybrids – that will result in the expansion of the financial sector.
Africa calling
Mr Corneille Karekezi, Group MD/CEO of Africa Re, spoke on why Africa has become an attractive destination for investment in insurance and reinsurance.
“There are so many favourable factors that converge to make Africa the next frontier of insurance and reinsurance growth,” he said. With the continent made up of 54 countries, there is a need to take the right initiatives to harness the current potential. Intra-African M&A, as well as FDIs in insurance are on the rise there.
The three-day rendezvous with the theme of “The Dynamics of Regional Reinsurance – A SAARC Perspective’’ was attended by 580 delegates from 40 countries and was jointly organised by Asia Insurance Review and GIC Re.
Panels on underwriting, support for SAARC markets and Nat CAT pool
The Rendezvous had three high-level panel discussions.
Maintain underwriting discipline
The panel on insurance and reinsurance CEOs stressed on innovation and differentiation as the way forward for both reinsurers and insurers to remain robust and competitive going forward.
Panellists agreed that the biggest threat to the market today was that of (re)insurance companies failing to maintain underwriting discipline in an increasingly competitive environment. The need for risk management to form an integral component of all underlying decision-making processes was also emphasised.
GIC Re will continue to support SAARC markets
The panel on SAARC markets saw great bonhomie among the representatives of the five markets with the Pakistan market representative, Mr Saifuddin N Zoomkawala, Chairman, EFU General Insurance Company, calling for “big brother” India to ensure that the “small brothers” are well looked after.
Mr Deepak Godbole, Deputy GM of GIC Re, assured everyone that inspite of the many problems that exist in the various markets, his company would continue to extend support to the SAARC region. “GIC Re is already the lead reinsurer of most insurers in the region and we have stood by them in their times of difficulty,” he said.
Call for Nat CAT pool for the region
Ms Farzana Chowdhury, MD & CEO, Green Delta Insurance Company, Bangladesh, spoke on the need to set up a Nat CAT pool for the SAARC region. “Such a pool will help smaller nations like ours cope with natural disasters, which have increased substantially in recent times, thereby reducing strain on insurers and on limited government resources,” she said.
The panel on Nat CATs in the SAARC region highlighted how the region was prone to natural catastrophes such as earthquakes, windstorms and floods.
India faced a number of major CAT events in the past two years, which included floods and landslides in the northern state of Uttarakhand in 2013 and Cyclone Hudud and floods in the state of Jammu & Kashmir in 2014. Eighty-five percent of India’s total losses from CATs are uninsured. Moreover demand for disaster insurance is low in India.
Governments need to support disaster insurance efforts
Citing a report of the Malta Legal Experts Forum, Dr George E Thomas, Professor, College of Insurance, Insurance Institute of India, mentioned five reasons why demand for disaster insurance was low – severe budget constraints, lack of effective knowledge of catastrophes, cognitive limitations such as the “it will not happen to me” attitude, the behavioural bias – willing to bear uncertain losses of low probability disaster than bear the certain loss of premium which is a reality, and the expectation that the government will pay anyway.
On the role of governments in supporting disaster insurance, it was felt that governments should facilitate pooling of disaster risks, creating larger portfolio bases, congenial reinsurance environments and reduced transaction costs.
“Governments should be aware that disaster risks need to be spread on the widest canvas through reinsurance and one should never forget that disasters are insurable only because they are reinsurable,” said Dr Thomas.
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