INDIAN INSURANCE INDUSTRY

2001-02
D. SENGUPTA
CHAIRMAN
GENERAL INSURANCE
CORPORATION OF INDIA

Opening up
up of
of Indian
Indian
Opening
Insurance Industry
Industry
Insurance

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

India -- facts
facts
India
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)

Insurance Industry
Industry
Insurance
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

Insurance Industry
Industry
Insurance
Indian Non-Life business - Premiums
and Claims ratios
Fire

Cargo

Hull

Motor Aviation Engine Other

ering Misc

Premium 23122
7651
2299 34174
1844
Claims
10769
4833
2687 41720
2924
Loss
46.6% 63.2% 116.9% 122.1% 158.6%
Ratio
Premium
Claims
Loss
Ratio

61042
38302
62.7%

All Classes
Excluding.
Motor

6738 19388
4203 12886
62.4% 66.5%

Figures in Rs. Million

Year : 1999-00

Insurance Industry
Industry
Insurance
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.

Insurance Industry
Industry
Insurance

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).

Insurance Industry
Industry
Insurance

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)..

Insurance Industry
Industry
Insurance
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.

Insurance Industry
Industry
Insurance
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.

Insurance Industry
Industry
Insurance
The Industry today
Today in addition to the four existing publicsector 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

Insurance Industry
Industry
Insurance
Non Life Insurance companies
Name of the company, and Head Office Partner
1

Tata-AIG General Insurance Co. Ltd,

Mumbai

AIG

Royal Sundaram Alliance Insurance

Co. Ltd, Chennai

Royal & Sun Alliance, UK

IFFCO Tokio General Insurance Co.

Ltd.. Gurgaon near Delhi.

Tokio Marine, Japan

Bajaj Allianz General Insurance Co.

Ltd. Pune.

Allianz, Germany

ICICI Lombard General Insurance

Company Ltd. Mumbai.

Lombard group,
Canada

Reliance General Insurance Company

Ltd. Mumbai

NO Partner

National Insurance Company Ltd.

100% Government owned

New India Assurance Company Ltd.

100% Government owned

Oriental Insurance Company Ltd.

100% Government owned

10

United Indial Insurance Company Ltd.

100% Government owned

Insurance Industry
Industry
Insurance
Life Insurance companies

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.

Name of the company

and Head Office
Life Insurance Corpn. Of India
Tata-AIG Life Insurance Co. Ltd,
Mumbai
Bajaj Allianz Life Insurance Co. Ltd.
Pune.
ICICI Prudential Life Insurance
Company Ltd. Mumbai.
OM Kotak Mahindra Life Insurance
Co. Ltd, Mumbai
HDFC Standard Life Insurance
Max India Ltd
Birla Sun Life Insurance
SBI Life Insurance
ING Vysya Life Insurance
CGNU Dabur Life Insurance
Hero PNB Zurich Life
Sahara India Life Insurance
Reliance Life Insurance

Partner
100% government owned
AIG
Allianz, Germany
Prudential
Old Mutual of South Africa
Standard Life, UK
New York Life, USA
Sun Life, Canada
Cardiff, France
ING, Netherlands
CGNU, UK
Zurich Life, Switzerland
No Partner
No Partner

Insurance Industry
Industry
Insurance

Credit Insurance companies

Name of the company, and Head
Office

Partner

Export Credit Guarantee

Corporation, Mumbai

100% Government owned

New India Assurance Company

Gerling global, Germany

Insurance Industry
Industry
Insurance
Other Insurance related institutions`
Name

Function

Indian Register of Shipping

Marine Hull Classification

Society

Tariff Advisory Committee

Insurance tariff authority

Loss Prevention Association of

India

Loss minimisation and

consumer education

Actuarial Society of India

Actuarial

Insurance Institute of India

Insurance Examination and

diplomas

National Insurance Academy, Pune Premier insurance

education

College of Insurance

Insurance education

Loss Adjusters Association

Loss adjusters

GIC of
of India
India
GIC
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

GIC of
of India
India
GIC
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

GlC -- A
ATRUSTED
TRUSTED SECURITY
SECURITY
GlC
TEST
TEST11::NET
NET
PREMIUM/
PREMIUM/
ADJUSTED
ADJUSTED
SHAREHOLD
SHAREHOLD
ERS
ERSFUNDS
FUNDS

42.4
42.4

GIC
GIC

189.4
189.4

Tokio
Tokio

115.6
115.6

Swiss
SwissRe
Re
Munich
Munich

121.2
121.2

Malaysian
Malaysian

81.7
81.7
131.5
131.5

African
African
Singapore
Singapore

SS&&PP
Standard
Standard
<<330%
330%

Low exposure to
shareholder fundsUnder-utilised
Capacity

31.1
31.1
62.8
62.8

Egypt
EgyptRe
Re

187.9
187.9

Central
CentralRe
Re

393.1
393.1

Korean
KoreanRe
Re
00

100
100

200
200

300
300

400
400

measures a companys overall underwriting

exposure in relation to its capital base.

500
500

Global Market
Market :: Where
Where we
we stand?
stand?
Global
TEST
TEST22::
CHANGE
CHANGEIN
IN
NET
NET
PREMIUM
PREMIUM

10.3
10.3

GIC
GIC

-3.8
Tokio
-3.8
Tokio
25.7
25.7

Swiss
SwissRe
Re

Low exposure, no
extra capital
requirement

Munich
Munich

-13.8
-13.8

6.0
6.0

Malaysian
Malaysian
African
African

SS&&PP
Standard
Standard::
Between
Between
(-(-10%
10%)) and
and
(+
(+30%)
30%)

-12.2
-12.2

5.5
5.5

Singapore
Singapore

6.7
6.7

Egypt
EgyptRe
Re

14.0
14.0

Central
CentralRe
Re

6.6
6.6

Korean
KoreanRe
Re
-20
-20

-10
-10

00

10
10

20
20

...seeks to monitor the rate of change of exposure

indicating need for capital backing

30
30

Global Market
Market :: Where
Where we
we stand?
stand?
Global
TEST
TEST33::

REINSURANCE
REINSURANCE
CEDED/GROSS
CEDED/GROSS
PREMIUM
PREMIUM

29.3
29.3
31.3
31.3

GIC
GIC
Tokio
Tokio

8.4
8.4

Swiss
SwissRe
Re

9.0
9.0

Munich
Munich
Malaysian
Malaysian
African
African

SS&&PP
Standard
Standard::
Greater
Greater than
than
50%
50%

7.1
7.1

Low dependence on
reinsurers indicating
sound financials and
43.7
43.7
retention capacity

Singapore
Singapore

33.6
33.6
31.8
31.8

Egypt
EgyptRe
Re

41.4
41.4

Central
CentralRe
Re

34.2
34.2

Korean
KoreanRe
Re
00

10
10

20
20

30
30

40
40

measures the extent of dependence on

reinsurance/ retrocessions.

50
50

Global Market
Market :: Where
Where we
we stand?
stand?
Global
TEST
TEST44::
TECHNICAL
TECHNICAL
RESERVES
RESERVES
/ADJUSTED
/ADJUSTEDLIQUID
LIQUID
ASSETS
ASSETS
SS&&PPStandard
Standard ::
<<105%
105%
..assess the
adequacy of the
companys liquidity
in relation to its
technical insurance
liabilities and
ability to respond
to heavy cash calls

47.2
47.2

GIC
GIC

117.7
117.7

Tokio
Tokio

58.9
58.9
Highly

Swiss
SwissRe
Re

liquid and
enough financial
50.1
50.1
strength to support
65.5
the fresh risks
65.5

Munich
Munich
Malaysian
Malaysian
African
African

114.5
114.5
71.6
71.6

Singapore
Singapore
Egypt
EgyptRe
Re

52.0
52.0
62.6
62.6

Central
CentralRe
Re

84.3
84.3

Korean
KoreanRe
Re
00

50
50

100
100

150
150

Global Market
Market :: Where
Where we
we stand?
stand?
Global
TEST
TEST55::TWO
TWOYEAR
YEARUNDERWRITING
UNDERWRITINGPROFIT/
PROFIT/INVESTMENT
INVESTMENT
INCOME
INCOMERATIO
RATIO

SS&&PPStandard
Standard::>>-25%
-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

-35.4

GIC

97.9

Tokio

12.7
Matter

of concern,
however relates to only
recent years of
2.7
domestic catastrophic
losses
9.6

Swiss Re
Munich

-71.4

Malaysian
African
Singapore

81.1
17.9

Egypt Re

82.0

Central Re

-70.1
-100

Korean Re
-50

50

100

150

Global Market
Market :: Where
Where we
we stand?
stand?
Global
TEST
TEST66::PRETAX
PRETAX
PROFITS/AVG.
PROFITS/AVG.
ADJUSTED
ADJUSTED
SHAREHOLDERS
SHAREHOLDERS
FUNDS
FUNDS
SS&&PPStandard
Standard::
Greater
Greaterthan
than5%
5%

.this is the
familiar
return on
equity ratio.

21.5

GIC

7.3

Tokio

Comparable with
world class
reinsurers

17.8

Swiss Re

6.8

Munich

32.2

Malaysian

5.9

African

37.6

Singapore

24.2

Egypt Re

4.6

Central Re

6.0

Korean Re
0

10

20

30

40

Global Market
Market :: Where
Where we
we stand?
stand?
Global
TEST
TEST7:
7: TECH.
TECH.RESERVES+ADJ.
RESERVES+ADJ.SHAREHOLDERS
SHAREHOLDERS
FUNDS/NET
FUNDS/NETPREMIUM
PREMIUM
SS&&PPStandard
Standard::
>>150%
150%
.the purpose of
this test is to
identify
companies which
may be in total
under-reserved
and/or
undercapitalised.

410.4

GIC

380.6

Tokio
Swiss Re

313.9

Munich

304.0

Malaysian

315.8

African

173.8

Singapore

Adequate
reserves and
capital, can
offer more
capacity
587.0

Egypt Re

431.7
143.2

Central Re

93.3

Korean Re
0

100

200

300

400

500

600

700

Global Market
Market :: Where
Where we
we stand?
stand?
Global
TEST
TEST88:: TECHNICAL
TECHNICALRESERVES/ADJUSTED
RESERVES/ADJUSTED
SHAREHOLDERS
SHAREHOLDERSFUNDS
FUNDS
SS&&PPStandard
Standard::
<<350%
350%
.this test
measures the
scale of the
companys
reserves in
relation to the
size of its
trading base.

73.9

GIC

620.7

Tokio

262.7

Swiss Re

Low exposure
compared to the asset
base indicating
unutilised capacity

Munich

268.5

Malaysian

157.9

African

128.7

Singapore

82.6
171.0

Egypt Re

169.0

Central Re

266.7

Korean Re
0

100

200

300

400

500

600

700

GIC of
of India
India
GIC
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),

THANK YOU

GIC of
of India
India
GIC
50000

40000

30000

20000

10000
GICGP
0
1980

PREDGPGD
1984

1982

1988

1986

1992

1990

YEAR, not periodic

1996

1994

2000

1998

2004

2002

2008

2006

GIC of
of India
India
GIC
60000

50000

40000

30000

20000

10000

GICGP

0
1980

PREDGP1
1984

1982

1988

1986

1992

1990

YEAR, not periodic

1996

1994

2000

1998

2004

2002

2008

2006