Government-owned Agriculture Insurance Company (AIC) is planning to launch crop reinsurance services outside India, particularly in South Asia.
The company received approval from IRDA (Insurance Regulatory and Development Authority) for inward insurance (reinsurance services in a foreign country). It is currently in discussions with intermediaries to launch the product by January 2020.
“Our solvency ratio is 2.99 compared to the regulatory need of 1.5 and our capital base is over Rs 3500 crore. Given our expertise in crop insurance, we want to help other developing countries. We feel we are well equipped to provide reinsurance support to them,” Rajeev Chaudhary, managing director and chairman of AIC told Business Standard.
AIC is looking to launch reinsurance services in countries like Nepal, Sri Lanka, Philippines and Bangladesh in the initial phase.
AIC was established by the government as the sole implementing agency for its then flagship crop insurance programme, National Agricultural Insurance Scheme (NAIS). After the launch of Pradhan Mantri Fasal Bima Yojna, the domestic crop insurance market in India has become competitive with many private companies joining the bandwagon. However, AIC still continues to enjoy a major share of around 50 per cent in the crop insurance market. This year, the total premium collection of the firm is expected to be around Rs 13000 crore, said Chaudhary. Last year, its premium collection was about Rs 7000 crore.
“In medium term, AIC would be diversifying to offer insurance products for other allied activities in agriculture, viz, cattle, farm equipment fisheries and poultry insurance. Besides, the company is also planning to launch insurance products for commercial and plantation crops. We want to make AIC one stop solution for all the insurance needs of farmers, he said.
Notably, India is one of the biggest reinsurance market for global companies after the launch of Pradhan Mantri Fasal Bima Yojna. In view of the large repayments to global reinsurers, the government is considering an overhaul in the reinsurance mechanism by creating a pool for claim settlements on the domestic front. Under the proposed pool mechanism, while private firms can retain a small part of the premium, a large part goes to the pool, which will serve to pay out the claims. In the initial years, when the pool is small, proposals such as budgetary support from the government is also being discussed. In the last six seasons, close to Rs 5,000 crore has flown to the books of foreign reinsurers, as overall claim ratio has been just around 77 per cent, which has led the government to rethink the involvement of reinsurance companies in the business.