Q&A: Sanjay Kedia, Marsh India

'India presents both challenges and opportunities'

Marsh India, the first foreign broker and risk advisor to secure the Insurance Regulatory and Development Authority's (Irda) licence for broking general insurance and reinsurance, plans to increase its business by 25-30 per cent yearly over the next five years. In an interview with Niladri Bhattacharya, Chief Executive Officer Sanjay Kedia says because of the excess capacity and the reinsurance market having adequate capital, the catastrophe in Japan did not lead a significant hardening of rates. Edited excerpts:

What is the scenario in the global reinsurance market? Are you witnessing a hardening of prices after the Japan catastrophe?
That the Japan earthquake would lead to significant rise in catastrophe covers was expected. However, reinsurance prices rose only for a few companies, especially in the Indian insurance market. Most of the companies were able to get renewals either at expiry or even at a discount. The Japan earthquake losses were estimated at around $15-20 billion. But because of the excess capacity and the reinsurance market having adequate capital to absorb the losses, it did not lead a significant hardening of rates.But the reinsurance market, wherever possible, demanded higher rates.

Going forward, what would be Marsh India’s growth strategy? Over the last three years, we have doubled our revenues. We have already placed over Rs 1,000 crore as direct broking premium by December 2010 and expect to exceed Rs 1,500 crore by December 2012. Over the next five years, we plan to grow our business by 25-30 per cent annually.

You acquired two companies last year. Do you have any more acquisition plans?
Last year, we successfully acquired the insurance broking business of HSBC and IL&FS. We are always in talks with some companies for acquisitions. We are also open to acquiring a team of individuals who could add value to our services.

With more Indian companies going abroad, the need for complex covers and risk management solutions has increased. Do you see this as an emerging challenge?
It is both a challenge, as well as an opportunity for us. The challenge is to widen the scope of risk advisory services in emerging risk issues, including supply chain business interruption and corporate governance. When a corporate house acquires business overseas, it initially tries to keep the existing insurance policies. However, as companies consolidate their businesses, they try to centralise their production facilities. Supply chain issues and business interruption risk then become important, since suppliers cannot be centralised.

What are the major challenges for the Indian broking industry?
There are certain challenges which are dampening growth of the industry. First, we still do not handle the premiums and claim collection of our clients. Second, broking houses are restricted from offering claims advisory services to clients in those cases in which they are not acting as brokers. Third, the availability of talent pool in risk management and broking business is a serious issue.

There is no brokerage for terrorism insurance policies, while the fees are mandated for other covers by the regulator. Have you taken up the issue with Irda?
We are in a dialogue with the regulator through the Brokers' Association. The association has asked for a brokerage of 10 per cent for such covers.