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Global reinsurers have been attracted by the potential of the Indian market, but if they are taxed at around 40 per cent, as most foreign entities are - way higher than reinsurers in Singapore or the UAE - they may well limit their investment in India as well as scale down operations in the future if the global economy takes a hit.

- Apr 10, 2017,
- Updated Apr 10, 2017 1:51 PM IST
Some reinsurers sound a note of warning on getting too competitive in an already low-cost market. "By providing innovative risk transfer solutions and other offerings, reinsurers can optimise an insurance company's reinsurance buying," says Kotak of Munich Re. "This would be a better way of bringing down reinsurance costs rather than competing through predatory pricing for traditional covers." Since the Indian market is relatively small and dominated by retail insurance, another pitfall could be that of reinsurers writing lines of business they would traditionally not have participated in, simply to justify their investment in India. "Maintaining underwriting discipline will be a huge challenge in India, particularly against rising expenses," says Garigiparthy of Lloyd's. He also warns against the proliferation of brokers. "It is common practice in India for multiple brokers to seek reinsurance quotes on the same risk," he adds. "We would encourage brokers to collaborate and agree upon a framework as to who is the 'broker of record' relating to a particular placement, in line with international best practices."
At the same time, Indian branches should be allowed sufficient autonomy - if the parent company tries to remote control Indian operations, it will lose the benefit of the access to local data and expertise. "It is imperative that reinsurers provide the right blend of their technical pricing knowledge, international experience and local knowhow of the risks," says Kotak of Munich Re. "A strong underwriting backed approach is crucial for reinsurers as they don't have the investment income advantage of primary insurers to guarantee sustainability." Reinsurers should also prepare to be patient. "It is essential to carry out full due diligence before applying for a licence," says Garigi-parthy. "But once a reinsurance company has entered the market, it is extremely important for it to remain committed for the long term."
Some reinsurers sound a note of warning on getting too competitive in an already low-cost market. "By providing innovative risk transfer solutions and other offerings, reinsurers can optimise an insurance company's reinsurance buying," says Kotak of Munich Re. "This would be a better way of bringing down reinsurance costs rather than competing through predatory pricing for traditional covers." Since the Indian market is relatively small and dominated by retail insurance, another pitfall could be that of reinsurers writing lines of business they would traditionally not have participated in, simply to justify their investment in India. "Maintaining underwriting discipline will be a huge challenge in India, particularly against rising expenses," says Garigiparthy of Lloyd's. He also warns against the proliferation of brokers. "It is common practice in India for multiple brokers to seek reinsurance quotes on the same risk," he adds. "We would encourage brokers to collaborate and agree upon a framework as to who is the 'broker of record' relating to a particular placement, in line with international best practices."
At the same time, Indian branches should be allowed sufficient autonomy - if the parent company tries to remote control Indian operations, it will lose the benefit of the access to local data and expertise. "It is imperative that reinsurers provide the right blend of their technical pricing knowledge, international experience and local knowhow of the risks," says Kotak of Munich Re. "A strong underwriting backed approach is crucial for reinsurers as they don't have the investment income advantage of primary insurers to guarantee sustainability." Reinsurers should also prepare to be patient. "It is essential to carry out full due diligence before applying for a licence," says Garigi-parthy. "But once a reinsurance company has entered the market, it is extremely important for it to remain committed for the long term."