The Hindu Business Line : Pvt non-life insurers expand share to 35% in 2006-07

Bangalore May 15 Private sector non-life insurers have expanded their share in 2006-07 (FY07) to 35 per cent in an intensely competitive domestic market.

Private sector share in the non-life insurance market in 2005-06 was 26 per cent, according to figures released by the Insurance Regulatory and Development Authority. Non-life insurers' gross premium flow was Rs 25,002.45 crore in FY07 against Rs 20,431.82 crore, a growth of 22.37 per cent.

Growth momentum

The growth momentum in the private sector was provided by ICICI Lombard General Insurance Company, which grew by 89 per cent during the year earning a premium of Rs 3,003.45 crore.

ICICI Lombard is currently the largest private sector insurer in the country. Industry sources said that ICICI was also very close to displacing the public sector Public sector non-life insurance grew by 8.6 per cent in FY07 to Rs 16,285.51 crore against Rs 14,997.09 crore in the corresponding period of the previous year. The largest public sector insurer during the period continued to be the New India Assurance Company with a gross premium accretion of Rs 5,024.15 crore though it grew only at 4.86 per cent.

The fastest growing public sector insurer was Oriental Insurance Company Ltd with gross premium accretions of Rs 3,940.53 crore or a growth of 11.72 per cent.

United India's premium accretions were Rs 3,509.95 crore, up 11.26 per cent over the previous year.

However, one of the critical indicators of growth was net premiums, industry sources said. In the case of the private sector, the retentions were very low. Consequently, faced with solvency pressures, a large chunk of the liabilities were ceded to the national reinsurer, General Insurance Corporation of India and global reinsurers, through treaties or through the Facultative Reinsurance route (Face Re - where the ceding insurer offers individual risks to a reinsurer who has the right to accept or reject each risk), the sources said.

High retentions

Public sector, on the other hand, had high retentions till March this year, on account of motor insurance.

This had impacted their solvency for picking up high value big ticket business and resorting to undercutting of tariffs.

But, since April this year, with the formation of the motor pool (a mechanism created by the 12 public and private sector non-life insurers to take over motor third party risks), the solvency pressures had reduced considerably on the PSU insurers.

Simultaneously, the liabilities would increase on the private sector insurers, since they are also part of the pool arrangement, leading to an almost level playing field.

Deregulated tariff

In addition, the deregulated tariff environment has prompted the public sector insurers to pursue an aggressive strategy for top line growth.

Senior PSU insurers said that this implied that the additional solvency released on account of transfer of the motor pool and the high capitalisation would be leveraged to pitch for high value business at aggressive tariffs.

This implied that the tariff war in the non-life insurance market was far from over.

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