GIC Re and Hannover Re sign an Agreement of Cooperation for Life reinsurance
GIC Re (General Insurance Corporation of India), currently the sole reinsurer in the Indian market and Hannover Re, the 5th largest global life reinsurance company, have agreed to jointly develop life reinsurance business in India.
At a function held in Mumbai today a Cooperation Agreement was signed between the two organisations in the presence of Mr. P K Bansal, Hon. Union Minister of State for Finance. Mr. M Ramaprasad, General Manager, GIC Re and Mr. Wolf Becke, CEO, Hannover Life Re signed the agreement. Mr. G. Prabhakara, Member (Life), Insurance Regulatory & Development Authority of India (IRDA) was the guest of Honour at the agreement signing ceremony.
GIC Re and Hannover Re will jointly market and service the life reinsurance business in India. This agreement will be for a minimum period of 5 years and will involve sharing of the business underwritten by both the parties in India. This synergy would provide the Indian life insurance industry with a competent global life reinsurance alternative whilst developing this expertise within the country. This initiative also augurs well for the Indian life insurance industry which has seen a upward growth curve since the liberalization with the new business premium figure for 2007-08 at Rs.93,000 crores, an increase of 23% over the previous year. This exciting market promises to be more happening in times ahead with the entry of this new partnership.
The agreement signing event was also graced by the who’s who of the insurance industry in India including CEOs and Appointed Actuaries of life insurance companies, CEOs of non-life companies, representatives from the IRDA and the Board members of both GIC Re and Hannover Re.
GIC Re has been doing reinsurance business since its inception in 1972. It has been the dominant reinsurer for the Indian market in the non-life insurance sector. Following liberalization of the insurance industry in 2001, GIC Re was also designated as the national reinsurer doing exclusively reinsurance business.
GIC Re discontinued its direct business operations in core sectors like Aviation and Agriculture subsequent to liberalization and ventured into new areas. GIC Re set up its life reinsurance department in 2002, which began operations in 2003. As there was lack of in-house talent and exposure in this line of business, the growth has been slow. Also, by the time GIC Re could approach the market to solicit business; most of the global reinsurers like Swiss Re, Munich Re and RGA had already established their presence and captured the market. Life reinsurance involves the reinsurer to be involved right from the filing of product licenses by the insurer as such it becomes difficult to get business once the initial stage is missed out.
As GIC Re commenced life operations a little after liberalization, the initial opportunity was missed. In the subsequent years, as there were globally more experienced players in the market, significant market share could not be garnered. The reinsurance premium outgo from the life insurance market in the country is around Rs 200 crores for the year 2006-07 and GIC Re’s share is around 2%.
GIC Re has now joined hands with Hannover Re for development of life reinsurance business in the country. Hannover Re is the 5th largest life reinsurer in the world and has global expertise in running this line of business. This partnership would involve technical knowledge transfer from Hannover Re to GIC Re personnel, joint marketing and servicing of business with GIC Re providing the local market knowledge and introductions to the life market players in India. Under the terms of the agreement to be signed on the 19th of June 2008 GIC Re and Hannover Re propose to target significant market share to build a profitable book of business whilst providing good service to the life insurance industry.
Reinsurance contracts allow more than one reinsurer to be on the same risk. Whilst in non-life reinsurance, several reinsurers are involved in a single risk; in life reinsurance normally the risk is absorbed by a single reinsurer or at the most 2 to 3 reinsurers. Whilst non-life businesses are yearly renewable contracts, life business is long -term contract which in turn necessitates long term commitments from the side of the reinsurers also. Life reinsurers are chosen with great care by the insurers with a view to developing long term relationships. Life reinsurers are also expected to provide training, product development support and technical support to the clients on a long term basis.
Currently there are 19 life insurers licensed to conduct life insurance business in India. The life insurance market has shown buoyant growth since liberalization. The new business premium for the year 2007-08 is around Rs. 93,000 crores having grown 23% over the previous year. This is a quantum leap from the new business premium of Rs.10, 663 Cores in the first year after liberalization in 2001-02.
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