Munich Re has set global targets for its reinsurance business and Ergo for the next five years. How will India contribute to these targets?
India is a major contributor to our targets, with considerable growth opportunities in both primary insurance and reinsurance. Munich Re knows the market well and brings deep expertise to serve clients. India is also an important technology and talent hub for us. We operate a technology and services centre here, and several colleagues have moved from our India branch to other locations globally, bringing their skills and expertise to the wider organisation.
Across Asia-Pacific (APAC), comparatively low insurance penetration and stronger economic growth than in many other markets create considerable opportunities. We are prepared to deploy more capital in these markets. India is already a strategic market, and we expect its share, along with that of APAC, in our overall portfolio to increase over the coming decades.
Do you have a specific target for how much extra capital you intend to mobilise in India and other Asian markets?
We have no fixed target. Capital deployment depends on the opportunities in individual markets. We have substantial capital at the group level and allocate it when attractive growth opportunities arise, provided the terms and conditions meet our minimum requirements, and the margins justify the investment for our investors. If these conditions are met, we see no limitations.
The global reinsurance market is softening, and India is no exception. Where do you see the market bottoming out,
and what could trigger a reversal in rates?
The market remains fundamentally attractive but has softened over the past couple of years, primarily because there have been few large global losses. This has created pricing pressure in some segments, particularly natural catastrophe business. The Los Angeles wildfires were the last major event for the industry, and the quarters since then have been relatively benign. As a result, extensive capital is available from both traditional players and alternative capital providers. A major loss event, or a series of large events, could change this trend and turn the cycle.
Are the current reinsurance rates sustainable if the soft market continues for another five years without major losses?
The key question is how likely we are to avoid major losses. Globally, climate change is expected to increase the frequency or severity of losses. Even if some years are benign, losses are likely to rise over time, partly because insured values increase with inflation. The same applies to cyber losses, where we have leading expertise and market experience.
We remain optimistic about the long-term outlook for reinsurers globally, particularly in India, and expect rates to become sustainable again. However, the market’s cyclical nature will remain unchanged. If primary insurers receive few claims payments from reinsurers for some time, they will eventually challenge pricing. A major loss event can reverse that dynamic.
These cycles are a natural overlay on a long-term rising demand curve. We are confident that reinsurance will grow profitably over the long term.
With new players entering India’s reinsurance market as domestic reinsurers and through Gujarat International Finance Tec-City (GIFT City), would you consider partnering an Indian company or establishing a presence in GIFT City?
We will focus on our strengths — deep risk expertise and a strong capital position — rather than on new players entering the market. We are happy with our existing foreign reinsurance branch, which has operated in India for almost a decade, providing expertise and capacity across segments through a strong local team.
Our brand is associated with being one of the most reliable reinsurers. We do not want to dilute that position and aim to remain consistent in our value proposition to global clients. Therefore, we have no plans to deviate from our global value proposition in local markets.
Munich Re has a presence in the domestic insurance market through Ergo. As foreign players exit partnerships, would you consider re-evaluating the partnership or listing the company?
We have partnered HDFC Bank for nearly 20 years and are very happy with the relationship. Our partner’s understanding of the market complements our international capabilities. We are among the top five private-sector multiline non-life insurers in India and are focused on our ambitious growth plans and delivering the best solutions for customers.We are not considering an initial public offering. Such decisions depend on the capital providers and the specific circumstances of each company. At present, there are no concrete plans to change the existing arrangement.
What growth do you expect in India's reinsurance market, and what will drive it?
The reinsurance market depends on the primary insurance market. India’s ambition to achieve universal insurance coverage by 2047 creates attractive growth prospects. Achieving this will require wider distribution and more consistent efforts to improve affordability.
As the primary insurance market expands, it will need substantial capital. Reinsurance can provide that capital, manage volatility and absorb natural catastrophe risks, which are particularly pronounced in some parts of India. The natural catastrophe protection gap currently stands at around 95 per cent, pointing to considerable growth potential for reinsurance.
The market will continue to experience cycles, and growth may sometimes be muted when rates decline. However, this should not distract us from the healthy underlying growth potential.
Amid ongoing regulatory changes, what are the biggest opportunities and challenges in the insurance market?
Low insurance penetration presents the biggest opportunity, given India’s large market, strong economic growth, and attractive business environment. The challenges include navigating numerous regulatory changes.
We remain optimistic because some reforms are moving towards sustainability and customer centricity. However, we remain cautious about certain market segments that are not sustainable over the long term. Addressing these imbalances will be important.
Overall, the opportunities outweigh the challenges. Munich Re aims to meet clients’ specific needs through long-term partnerships, offering stability and continuing to expand the boundaries of insurability, as we have done in areas such as renewable energy and cyber risks.
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