Life insurers explore financial reinsurance to raise capital

Mumbai: Life insurance companies are working on a new avenue to raise capital. At least eight life insurers are looking to raise fund through financial reinsurance model.

“One life insurance company has sent a proposal to Irdai for raising funds through reinsurance,” said a source in the know of the development.

A study by Actuarial firm Milliman showed that 35 per cent of the 17 companies in survey are looking to raise capital from reinsurers.


A reinsurance company gives capital to life insurance companies in the form of reinsurance commission and the insurance company service it in the form of premium over a period of time.

This capital is by way of debt and repayment is contingent on profitability. There is a sunset clause and reinsurers generally write off these investments if they don’t get paid within 15-20 years.

Four reinsurers — Munich Re, RGA, Swiss Re and Hannover Re — are looking to take exposure in Indian life insurance.

The life insurance industry has deployed .Rs 37,116 crore capital up to March 31, 2019. The industry needs capital to grow business.

Higher foreign direct investment of 49 per cent has only helped in the exchange of shares, with Indian shareholders making money in the process.