India’s resilient reinsurer
The General Insurance Corporation of India (GIC), as formerly known, was originally established as a holding company for all nationalised general insurance companies and was simultaneously designated as India’s reinsurer. It successfully managed and developed strategies for public sector non-life insurance companies for nearly thirty years until the government opened the insurance market to private players in 2000. Subsequently, GIC successfully transformed its operations and scaled up as a reinsurer, showing its ability to adapt to evolving market conditions. As times changed, GIC Re worked diligently to evolve and establish itself as a globally competitive reinsurer. Now it has entered a new era, driven by the management’s unwavering efforts to redefine the business approach and vision for the national institution.
The Government of India nationalised 55 general insurance companies in 1972. General Insurance Corporation (GIC) was
formed in the same year, and the government transferred all the nationalised general insurance companies under its control. A
consolidation among the general insurance companies that followed created four non-life insurers: National Insurance, New
India Assurance, Oriental Insurance and United India Insurance Company. GIC, as a holding company, played a big role in forming business strategies, designing products and setting a vision for the four public sector non-life insurers. GIC did the challenging work and greatly contributed to laying a foundation for India’s non-life insurance.
When the Insurance Regulatory and Development Authority Act, 1999 (IRDAA) came into existence in April 2000, the General
Insurance Business (Nationalisation) Act was also amended. That coincided with the opening of the insurance business to private entry, making GIC a reinsurer in the Indian market. A subsequent government notification reversed the ownership of the four general insurance companies to the government. General Insurance Corporation continued to be a public sector institution and rebranded as GIC Re with a mandate for the reinsurance business alone. Reinsurance plays a catalytic role in stabilising the insurers’ burden by sharing a portion of the risk. That is the fundamental principle of the reinsurance business. GIC Re has focused on reinsurance since 2000, with the privilege of obligatory cessions. There has been a consistent reduction in the obligatory cession from 20 per cent to the current four per cent. GIC Re, still the only Indian reinsurer, naturally remains a dominant player in the Indian reinsurance market. A lean and nimble organisation with 475 employees, GIC Re has firsthand
knowledge of the Indian and global insurance markets due to its wide-reaching footprint as a reinsurer. With highly experienced management refined through its legacy, the organisation maintains a diversified business profile, strong liquidity, and a satisfactory solvency position. GIC Re has embarked on a new journey of growth with profitability, and the result has been excellent, says Ramaswamy Narayanan, Chairman and Managing Director. This journey is now set on a smooth road after surmounting challenging times during the pandemic years and a period of aberration. The company took
corrective actions after facing difficulties after its equity share listing on stock exchanges in 2017, compounded by the
challenges presented by COVID-19 that followed. A team with deep domain knowledge identified the institution’s weaknesses
and risks, effectively shielding GIC Re from the stresses experienced since 2018, particularly from long-tail contracts that
heavily impacted its bottom line, leading to a significant decline in stock prices and disappointment among investors, including shareholding employees.
However, management spotted an opportunity for correction and a chance to reposition its business strategy. The GIC Re team took the time to reflect on their actions and realised the critical need for corrective measures to enhance the institution’s
competitiveness. “We looked internally and corrected ourselves. Now we can say our business growth assures better profitability due to our cautious approach, prudent planning and careful due diligence,” says Ramaswamy Narayanan. The message is clear: GIC Re will not hastily chase any unprofitable business, even though the team is aware that risk in underwriting is unpredictable. A systematic approach where underwriters conduct due diligence before the GIC Re team takes the final call drastically curtails the possibilities of losses. The team evaluates the risks associated with the business awaiting underwriting, considers immediate prospects, and reviews previous experiences before underwriting assets. The legacy of certain business segments provides deep insight into the trends of profit and loss consistency, which is essential for making underwriting decisions.
