General insurers need Rs 37,000 crore capital to grow at 20pc

The general insurance industry requires Rs 37,000 crore growth capital to achieve a CAGR growth rate of 20 per cent over next five years, says a report.
While public sector insurers require capital of Rs 27,000 crore of growth capital, the required amount for private sector players is Rs 10,000 crore, domestic rating agency Icra said in a report today, adding life insurers are well-capitalised with significantly higher solvency levels for most players.
"As unrealised gain of around Rs 40,000 crore is very high for PSU insurers now and so they don't need capital at this level. Still, they may go for capital raising through Tier-II bonds," said Karthik Srinivasan, senior vice-president and group head at Icra.

"Insurers have a room to raise Rs 20,000 crore through Tier-II bonds," he said.
As per existing regulations, insurers can go in for Tier-II bonds up to 50 per cent of their networth. National Insurance is the only state-owned player which has availed of this facility so far.
A public listing may help focus on profitable growth and consequently enhance their ability to raise capital in future, he said.

So far, ICICI Prudential Life is the only company that is listed. State-owned New India and GIC Re are in the process of IPO whereas National is likely to be listed by the fiscal- end. Similarly SBI Life, HDFC Life and Reliance General have also announced their IPO plans.

Icra expects growth rate of the life insurers to be around 15-16 per cent in terms of annual premium equivalent (APE) this fiscal year.
In APE terms, the industry grew at 19 per cent in fiscal 2017, driven by private players who grew 22 per cent, compared to a 16 per cent growth for the state-owned life insurance behemoth LIC.