Competition among domestic and overseas reinsurers has also contributed to the decline in rates.
More than 50 per cent of India’s non-life insurance business, worth ₹3 trillion, heads into facultative (occurring in response to circumstances) and treaty reinsurance renewals on April 1.
This time, along with state-owned GIC Re, India also has two new domestic reinsurers — Valueattics Re and Allianz Jio Reinsurance — participating in the business.
Apart from the domestic reinsurers, there are 12-13 foreign reinsurance branches (FRBs), reinsurers in GIFT City and cross-border reinsurers.
At the same time, brokers said rates hardened in certain businesses, such as aviation and other high-risk industries, while marine-insurance premiums remained broadly stable.
However, insurers are reducing prices to retain and grow market share despite pressure on profitability.
Even accounts with an experience of higher claims have seen a decrease in price.
Despite the softer market, segments such as climate-exposed risks, cyber, and long-tail liability continue to see competitive pricing.
In health and medical lines, post-pandemic medical inflation and rising claims have driven some upward pressure.
Insurance brokers also said that the West Asian conflict had not materially influenced April 1 renewals in India, except on specialty lines, particularly facultative, as distinct from treaty reinsurance.
According to Guy Carpenter, a business of Marsh (formerly Marsh McLennan), April 1 is characterised as a cedent-friendly (“cedent” is primary insurer) renewal due to benign loss experience in India and strong local capacity. It is termed one of the most competitive renewal seasons in recent years.
On the loss-free excess of the loss business, there were double-digit price reductions exceeding 20 per cent and over 2 per cent commission seen on proportional lines.
Pricing also remained competitive in liability and specialty lines, including cyber. The number of international players entering the Indian reinsurance market continues to grow, with a total of 18 foreign reinsurers registered with the International Financial Services Centre at the time of writing.
“The steep decline in property pricing is attributed to high competition. Demand remained stable, but supply increased significantly as both existing insurers and new entrants tried to gain or retain market share. There were no market agreements and insurers quoted freely. The large property-insurance market is estimated to be ₹4,000 crore-4,500 crore, and it is expected to shrink to ₹1,500 crore-2,000 crore due to the drop in premiums.
These are approximate figures as final numbers are still being determined,” said Amit Agarwal, managing director and chief executive officer (CEO), Howden India.
The Indian non-life insurance market is estimated at ₹3 trillion, with expected growth of 7-8 per cent. However, the drop in property premiums is expected to reduce growth by about 1 percentage point.
Reinsurance (including treaty and facultative) is estimated to be about one-third the market.
“Some of the high-risk areas are being charged accordingly, so there is a divergence in rates across certain lines of business. Rates have softened in some segments, but less than others. There is excess capacity chasing the market, due to which rates have softened. However, these are non-sustainable rates and the industry cannot survive at these levels,” said Sandeep Dadia, CEO and country head, Lockton India.
While companies are expected to benefit from lower insurance premiums, executives remain concerned that such sharp declines may not be sustainable if claims rise or capital tightens.
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