The Hindu Business Line : `Reliance General needs more capital for growth'

SIBLING rivalry in Reliance may have hit the headlines. But there is another area in the Reliance Group, which should cause it concern — the performance of its general insurance company.

It occupies the eleventh slot in an industry of 13 players, with a market share of less than one per cent in the first six months of this financial year.

Reliance General Insurance Company Ltd's (RGICL) premium accretion for the first half of this year was Rs 87.82 crore as against Rs 80.92 crore during the corresponding period last year.

Last year in April, RGICL had a market share of around 1.5 per cent. The industry itself has grown at an average of about 15.5 per cent during the period.

RGICL business has grown at about half the industry average during this year, according to the figures released by the Insurance Regulatory and Development Authority.

This was also despite the buoyant economy when general insurance growth was expected to maintain high growth rates. In fact, some of the other private sector peers of the RGICL have managed double-digit growth during the period.

Sources said that the slippage in growth rate stemmed from the fact that Reliance required more capital to grow its business. Capital requirement for the general insurance business tends to be on the high side during the first five years. But RGICL's capital has not increased significantly since inception. RGICL is capitalised at Rs 102 crore. ICICI Lombard, which also entered the sector around the same time, is capitalised at over Rs 220 crore and has a market share of close to 5 per cent, leading the pack of new insurers followed by Bajaj-Allianz General Insurance Ltd.

RGICL was one of the first companies to be licensed by the IRDA. Yet despite this head start, the market share has progressively slipped. Even companies that entered the sector much after Reliance have managed much higher market shares. These include companies such as IFFCO Tokio and Royal Sundaram General Insurance Company Ltd.

Both these companies had markets shares of approximately 1.7 and 2.5 per cent each during the first half of this year.

Moreover, sources said that despite the backing of the Reliance group, most of the group company's assets are insured with the public sector insurance companies. Very little of the group assets are insured with the RGICL, sources said. For instance, Reliance Infocomm assets are insured with National Insurance.

RGICL was the only insurance company that had entered the market without any foreign equity or technical support. When it was set up, sources said RGICL had also hoped to buy into one of the public sector general insurance companies at the time of Government divestment. Unless the sibling feud is sorted, RGICL capital requirements are unlikely to receive any priority by the parent group, sources added.