As per ICRA research, the private sector growth continued at a faster pace (22 percent Y-o-Y during FY2018), compared to the PSU growth of 13 percent during FY2018. Owing to the sizeable difference in growth rates, the share of the private players in the overall market improved to 55 percent in FY2018 from 53 percent in FY2017.
According to the research paper analyses, the performance of 17 general insurance companies collectively representing around 94 percent of the Industry-wide Gross Premium Written (IGPW) but excluding ECGC, AIC of India and specialised health insurers in FY2018.
"We believe that private players will continue to display strong growth in Motor, while Health sector business (retail business) will continue the strong run in FY2019. Crop insurance growth for the private players will continue but not as rapidly as FY2016/17 growth rates, as PSU insurance companies have started bidding for business in 2017, and loss rates have increased in FY2018," said Group Head - Financial Sector Ratings, ICRA Ltd, Karthik Srinivasan.
The slowdown in business was evident in the fire/property segment, and Motor OD segments. However, health and motor TP bucked the trend, and the PSU insurers grew rapidly in these segments.
However, ICRA expects the PSU insurers to improve pricing in Motor OD segment, and be more selective in the health segment in FY2019. This would result in a slower growth but a relatively better from underwriting profitability.
ICRA expects the private sector general insurers requiring Rs. 12 billion to Rs. 30 billion of capital infusion in FY2019, to maintain the current growth rate of 17-20 percent (on a modest profitability base). However, if the private sector continues with its current profitability (13 percent for the select private players), the capital requirement would fall to Rs. 12 billion. With insurance companies, allowed to raise Tier 2 bonds, companies could explore this route to raise their solvency levels. As per estimates, insurance companies have raised around Rs 25.8 billion till date by way of Tier 2 bonds, with more companies looking at this route to bolster their solvency levels.
"Even as actual capital requirements will depend on the business mix, growth rates and claims experience, ICRA estimates that to maintain a solvency of 1.65 times (compared to the regulatory requirement of 1.5 times) while growing at a CAGR of over 18-20 percent and maintaining similar claims records, the private sector players in the industry would require around Rs. 12 billion to Rs. 30 billion of equity capital over the next five years," added Srinivasan.