INDIAN INSURANCE INDUSTRY

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INDIAN INSURANCE INDUSTRY 2001-02 D.
SENGUPTA CHAIRMAN GENERAL INSURANCE CORPORATION
OF INDIA
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Opening up of Indian Insurance Industry
The Indian general insurance business has been
in the Government sector since 1973 and
transacted by GIC and its four wholly owned
subsidiary companies. In consonance with
Governments commitment to WTO, in 1999 the
insurance industry is opened up to private sector
insurance companies with foreign partners
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India - facts
India is the worlds largest democracy with
population of over 1 billion in 2000. It is a
member of the Commonwealth. It is a Union of
States comprising 28 States and 4 Union
Territories. About 28 population is
urban Despite changes in ruling parties, the
country remained democratic with an elected
government since independence in 1947 The Per
Capita Gross Domestic Product is approx. US 350
The per capita general insurance premium is Rs.
98 (US 2.09) Economic Growth Rate is
approximately 6.1 Inflation rate is 5.4
(Aug-2001) Exchange rate US is Rupees 47.10
(Aug-2001)
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Insurance Industry

• Prior to 1999 Government owned GIC was acting as
  holding company and reinsurer
• Four GIC-owned companies carrying out all the
  non-life insurance business in the country.
• The four companies have a net work of 4127
  Offices spread all over the country. They also
  have branch offices and/or joint venture
  operations in 30 foreign countries.
• Gross Direct Premium as at 31-Mar-2001 is Rs.
  97998 Million which is approximately US 2085
  Million

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Insurance Industry
Indian Non-Life business - Premiums and Claims
ratios
Figures in Rs. Million Year 1999-00
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Insurance Industry

• A large portion of general insurance business is
  Tariff controlled.
• Fire, Motor and Engineering classes are fully
  tariff controlled. Marine Hull major fleets are
  Tariff rated. Some part of Marine Cargo business
  is also tariffed.
• 20 of the premium written by the direct
  companies is ceded to the GIC as Obligatory
  Cessions.
• Around 89 of the premium was retained within the
  country and 11 is ceded outside the country.

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Insurance Industry

• Reinsurance premium ceded out is mainly in
  respect of Excess of Loss protections and
  proportional premium in respect of Fire/IAR Peak
  Risks, large engineering construction projects,
  Marine Hull- super tankers, Oil cargo shipments
  and Aviation-airline fleet risks.
• Largest valued fire risk is an oil refinery with
  a PML of Rs. 23000 Million (Approx. US 490
  Million).

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Insurance Industry

• Life insurance business was transacted by the
  state owned Life Insurance Corporation of India
  with branch and agency net-work all over the
  country.
• Total life premium in the country for the
  financial year 2000-01 is Rs. 348.77 Billion
  which is approximately US 7.42 million. It is
  estimated that for 2001-02 it would be Rs. 480
  Billion ( 10.20 Billion)..

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Insurance Industry

• In 1999 the Insurance ReguIatory and Development
  Authority (IRDA) Act was enacted and an authority
  (the Regulator) to control, regulate and enable
  development of insurance industry namely the IRDA
  was set up.
• Insurance companies in the private sector are
  allowed both in Life and Non-Life categories but
  composite companies are not permitted.

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Insurance Industry

• The requirements for private sector Insurance
  Companies are
• Minimum share capital of Rs. 1000 Million (US
  21.25 Million approx)
• Foreign joint-venture partners if any, are
  allowed to hold a maximum of 26 of the share
  capital.
• GIC appointed as the Indian Reinsurer with
  exclusively reinsurance function and corollary
  functions.

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Insurance Industry

• The Industry today
• Today in addition to the four existing
  public-sector general insurance companies, six
  private insurance companies have been licensed to
  function.
• Most of them have started functioning from the
  beginning of this financial year. Following
  Tables show details

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Insurance Industry
Non Life Insurance companies
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Insurance Industry
Life Insurance companies
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Insurance Industry
Credit Insurance companies
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Insurance Industry
Other Insurance related institutions
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GIC of India

• Following the IRDA Act, GIC is nominated as the
  Indian Reinsurer. Salient features
• Receiving Obligatory Cessions from all non-life
  insurance companies
• Organise and manage Market Pools and arrange for
  their excess of loss protection
• Accept treaty and facultative business from
  Indian companies.
• Collect, Analyse and Present Indian and
  International Insurance Data and Trend Analysis.
• Develop automatic capacity for products and lines
  of business, including new ones to be introduced

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GIC of India

• GIC as the International Reinsurer
• GIC has been accepting foreign inward reinsurance
  for 25 years now and has built up strong
  long-standing relationship with major
  international reinsurers such as Axa, SCOR,
  Partner Re, La Reunion, Lloyds Syndicates,
  Munich Re, Swiss Re and Zurich Re.
• Budgeted income from foreign inward business for
  2001-02 is US 200 Million.
• Capacity offered by GIC USD 50 mln on
  facultative risks and USD 10 mln for treaties
• GIC rated A by AM Best

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GlC - A TRUSTED SECURITY
TEST 1 NET PREMIUM/ ADJUSTED SHAREHOLDERS FUNDS
S P Standard
measures a companys overall underwriting
exposure in relation to its capital base.
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Global Market Where we stand?
TEST 2 CHANGE IN NET PREMIUM
S P Standard Between (- 10 ) and ( 30)
...seeks to monitor the rate of change of
exposure indicating need for capital backing
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Global Market Where we stand?
TEST 3 REINSURANCE CEDED/GROSS PREMIUM
S P Standard Greater than 50
measures the extent of dependence on
reinsurance/ retrocessions.
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Global Market Where we stand?
TEST 4 TECHNICAL RESERVES /ADJUSTED LIQUID
ASSETS
S P Standard
..assess the adequacy of the companys liquidity
in relation to its technical insurance
liabilities and ability to respond to heavy cash
calls
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Global Market Where we stand?
TEST 5 TWO YEAR UNDERWRITING PROFIT/ INVESTMENT
INCOME RATIO
S P Standard -25
..where a company has a lower level of return on
its underwriting operation so that it retains
less than 75 of its investment income after
paying underwriting losses, it will tend to have
difficulty maintaining the real value of its
capital base
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Global Market Where we stand?
TEST 6 PRETAX PROFITS/AVG. ADJUSTED
SHAREHOLDERS FUNDS
S P Standard Greater than 5
.this is the familiar return on equity ratio.
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Global Market Where we stand?
TEST 7 TECH. RESERVESADJ. SHAREHOLDERS
FUNDS/NET PREMIUM
S P Standard 150
.the purpose of this test is to identify
companies which may be in total under-reserved
and/or undercapitalised.
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Global Market Where we stand?
TEST 8 TECHNICAL RESERVES/ADJUSTED SHAREHOLDERS
FUNDS
S P Standard
.this test measures the scale of the companys
reserves in relation to the size of its trading
base.
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GIC of India

• GIC intends to expand the foreign inward
  operations and emerge as an international
  professional reinsurer. The targeted thrust
  areas are the Far-East Asia, South Asia, the
  Middle East and Africa.
• GIC has opened a representative office in London
  in 2001 and intends to open further offices in
  Moscow, Jeddah and Dubai.
• GIC has joint venture partners in Singapore
  (India International) and Malaysia (United
  Oriental insurance Co) and Kenya (KenIndia
  Insurance Co., Nairobi),

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THANK YOU
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GIC of India
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GIC of India