Insurance Act to help re-insurers enter Indian market: JLT

MUMBAI: Opening up of the insurance sector will lead to more insurance premium being retained in India and lesser dependence on the international market, according to the local joint venture of British insurance brokerage Jardine Lloyd Thompson.

Some large corporates may now be able to meet their reinsurance requirements within India as new players come in, instead of seeking support from London or Singapore, according to JLT Independent, which set shop in India this year. Mumbai-based financial services provider Sunidhi group is the other partner in the reinsurance brokerage.

"Today, most reinsurers are doing business in India without being in India. Now, there is an incentive for them to set up shop in India," said JLT Independent chief executive Sanjay Radhakrishnan.

"This is similar to manufacturing companies that have achieved cost efficiency by actually operating within the country."

The Insurance Act, passed by Parliament recently, allows foreign reinsurers, which cover the risk of insurers, to open branches in the country. It has also increased the limit for foreign direct investment in reinsurance to 49% from 26%, along with life, general insurance and health insurance.

Currently, government-owned GIC Re is the only registered reinsurer in India. Global giants like Swiss Re and Munich Re have representative offices here.

"India is a large market and in the next 10 to 15 years, it could be the largest insurance market globally, and if someone wants to be a large player globally in the insurance space, you just cannot ignore India. You would want to operate out of India," said Radhakrishnan. He said insurance coverage in India is low with premiums at a mere 1.5% of gross domestic product. "The total premium is Rs 70,000 crore. Imagine the scale of business when insurance penetration rises to 10% of GDP in 15-20 years," he said.