No disruption, just evolution

GIC Re chairman-cum-managing director Alice Vaidyan does not see any disruption ahead for the reinsurance industry.

Mrs Vaidyan, in her special welcome address at the inaugural ceremony of 12th India Rendezvous, said, “Overall, one could say there is no disruption, only consistent evolution in the industry but, nevertheless, it does not mean that the challenges thrown up are any less formidable.”

“The reinsurance industry saw major disruption following the 9/11 events in 2001 where governmental solutions had to bridge the void created by withdrawal of commercial insurance in regard to terrorism coverage.”

Mrs Vaidyan said, “Alternative capital experimented with the reinsurance sector through CAT bonds, sidecars and industry loss warranties - but those experiments apparently have met with only partial success.”

General insurance in India is at an inflection point

New India Assurance chairman-cum-managing director Atul Sahai said, “General insurance in India has come a long way, yet India remains one of the most under-penetrated insurance markets.”

He said, “Going ahead with the ‘push’ being provided by the government insurance schemes such as the prime minister’s crop insurance scheme and Ayushman Bharat (National Health Protection Mission), there is tremendous growth possible, especially with an industry-friendly regulator.”

Reinsurance enabled

SCOR Global P&C Reinsurance CEO Jean-Paul Conoscente said, “Three major global drivers are generating significant changes with strong implications for the (re)insurance sector.”

“Demography and climate, economy and industry, macro-economy and finance are the three major drivers of change and the areas they are impacting are sustainable development and energy transition; hubs, networks and connectivity and the intangible economy,” he said.

“The common theme in all these is resilience … for insurers, reinsurers and brokers.”

Role of government in enabling risk transfer

The first technical presentation of the day, by Swiss Re India branch CEO G Raju, focused on the role of government in public/private partnerships in enabling risk transfer.

Mr Raju said, “We need to step-up engagement with governments and public institutions to highlight the utility of risk transfer in mitigating the financial impact of natural catastrophes on government budgets, and to build public/private partnerships to strengthen fiscal resilience.”

He said, “Creditworthiness also improves with risk transfer as ratings agencies have now started evaluating exposures to natural disasters and impact on financing and refinancing costs.”

Crop insurance in India has challenges

ACE Insurance Brokers director Anil Arora highlighted the critical role of PMFBY for the Indian economy.

Putting aside media reports of profiteering by insurance companies from the scheme, he explained that insurers take on risk to protect farmers from the vagaries of nature and the impact of crop losses.

Essay competition winners feted

Mrs Vaidyan also gave away the certificates to the winners of the ‘Energising insurance in India’ essay competition.

New reinsurance regulations beneficial for industry

The panel discussion on the new reinsurance regulations in India witnessed strong support for the new rules which participants felt were good for the industry.

The panel, moderated by Kotak Mahindra General Insurance independent director Arun Agarwal, had a wide representation from the industry. GIC Re general manager Madhulika Bhaskar said that the new regulations had some good and salient features which had been ignored by many stakeholders.

“The IRDAI has recognised ART and proper risk diversification and also brings in the technical capability of the reinsurer in addition to its financial strength,” she said. Under the new regulations, Indian reinsurers retain the first right of refusal and cedants must seek terms from all Indian reinsurers which have undertaken reinsurance business continuously during the preceding three years and from at least four foreign reinsurance branches, allowing the non-Indian reinsurers to compete for business on equal terms with Indian reinsurers.

“Apart from the common minimum retention, reinsurers are now required to file their board approved underwriting policy with the IRDAI,” said Ms Bhaskar.

GIFT IFSC chief Dipesh Shah spoke of the advantages of doing business from GIFT city which is India’s first international financial services centre. “GIFT IFSC is an enabler to write offshore business and companies can benefit from the huge ecosystem that has been created along with tax incentives,” he said.

Moody’s Investors Services assistant vice president Mohammed Ali Londe said that new regulations come at a very opportune time for foreign reinsurers. “Players in the market need to focus and build their technical capabilities and provide stability to their balance sheets,” he said.

Markel International head of India Deepika Mathur said that the Indian market offers tremendous opportunities for all players and the new regulations would not affect their plans for the market.

Disruption is the new normal

The second panel discussion, on CEO’s perspectives on insurance disrupted, also had some industry heavyweights deliberating on a much discussed topic. Disruption is here to stay and the insurance industry has to learn to adapt and move forward.

The panel was moderated by Indian Institute of Insurance professor Dr George Thomas, who highlighted that insurance had its origins in disruption and so the current stage of disruption was nothing to be worried about.

AXA XL CEO Joseph Augustine said that disruption was reinventing the way the industry does its business. “Disruption was seen as a negative word but of late we see disruption has become necessary,” he said.

Green Delta managing director and CEO Farzana Chowdhury said that the insurance industry in Bangladesh has been slow in adapting technology and this needed to change to increase insurance penetration. “Technological innovation has been helping farmers and so we need to scale up the value-added services we are providing our consumers in the insurance sector,” she said.

GIC Re general manager Devesh Srivastava said that the insurance industry was ripe for disruption and that alternative capital was the big disruptor in the reinsurance space. “There is a fine line that demarcates innovations from disruptions and from a reinsurance industry perspective, being a B2B transaction, it is currently pretty laid back,” he said.