Entry of new players likely to intensify competition in reinsurance segment

New private players, including Valueattics Re, Jio Financial Services & Allianz are set to increase competition in India's reinsurance sector. However, experts believe GIC Re's position remains robust

After years of domination in the reinsurance segment as the sole domestic reinsurer, state-owned General Insurance Corporation (GIC Re) is set to see a rise in competition, with Prem Watsa and Kamesh Goyal-backed Valueattics Re receiving approval from the insurance regulator, and Jio Financial Services and Allianz Group tying up to form a 50:50 reinsurance, leveraging Allianz’s existing Allianz Re and Allianz Commercial portfolios and activities in India.

 

Having said that, these developments are unlikely to pose an immediate challenge to GIC Re’s domination, given that the state-owned reinsurer enjoys obligatory cession, and has advantage in the order of preference.

 

Obligatory cession refers to the mandatory portion of risk that general insurance companies are required to reinsure with GIC Re. This means that insurers must cede a specific percentage of their premiums or sum insured to GIC Re, regardless of whether they have other reinsurance arrangements.

 

“Competition is always beneficial and there is a need for domestic private reinsurers. The two companies, which will be set up, will not pose an immediate threat to GIC Re due to the position of the company currently. Also since setting up of the companies and regulatory approvals might take some time. However, during this time, if GIC Re does not strengthen its position, these companies can emerge as a threat to the state-owned reinsurer,” said an insurance consultant, who did not wish to be named.

 

“Also, there is no clarity on how the obligatory will be split between the re-insurers. There could also be a change in the order of preference,” he added.

 

“Reinsurance is a very capital-intensive business, and the proposed companies are not likely to see any capital crunch. Also, GIC Re has been the sole domestic reinsurer in the country. There is a need for more competition, and GIC Re should be able to survive even without the obligatory premium,” said an industry expert.

 

GIC Re has been conducting reinsurance business since 1972. Post-liberalisation of the insurance industry in 2001, GIC Re was designated as the national reinsurer, and has the advantage in the order of preference and obligatory cession. As of March 31, 2025, obligatory business accounted for 40 per cent of GIC Re’s domestic business. 

 

Recently, during an interaction with Business Standard regarding entry of private reinsurers, N Ramaswamy, chairman and managing director (CMD) of GIC Re, had said: “With Valueattics coming in, there will be competition. But, I believe, there is enough in this market for everyone. We don’t know if the obligatory cession will split between the two of us yet. Earlier, there was a company called ITI Re, which had been set up. At that time, I think they were told that first they need to get a rating and then they have to be in the market for three years before they become eligible for obligatory cession. That was the rule at that point of time. We still need to find out from regulator Irdai (Insurance Regulatory and Development Authority of India), still pretty early days for that.”

 

According to Section 101A of the Insurance Act, “every insurer shall reinsure with Indian reinsurers such percentage of the sum assured on each policy as may be specified by the Authority with the previous approval of the central government”. The obligatory premium ceded by the insurers with GIC Re currently stands at 4 per cent.

 

Currently, apart from GIC Re, there are 11 foreign reinsurance branches (FRBs) set up by global reinsurance companies. These include Allianz Re, Munich Re, Swiss Re, and Lloyd’s of London. That apart, there are 280 cross border reinsurers (CBRs) operating in India. According to Irdai’s annual report for 2023-24 (FY24), out of the gross reinsurance premium of ₹62,113.28 crore written by the Indian reinsurer and FRBs, the Indian business accounted for about 81 per cent and the rest was foreign business. Out of the total Indian business of ₹50,553 crore in FY24, GIC Re accounted for about 51 per cent and the remaining 49 per cent was written by FRBs.

 

Apart from the joint venture and operation as FRB, Allianz Re is also operating as International Financial Services Centres Authority Insurance Office (IIO) from Gujarat’s GIFT City. 

State of reinsurance biz

 

Along with GIC Re, there are 11 foreign reinsurance branches in India set up by global reinsurance firms

These include Allianz Re, Munich Re and Lloyd’s of London n Moreover, there are 280 CBRs

According to Irdai, out of the gross reinsurance premium of over ₹62K cr written by Indian reinsurer and FRBs in FY24, Indian business accounted for 81%

Out of this, GIC accounted for 51%, and remaining 49% was written by FRBs