Private sector general insurers would require additional capital ranging from INR12bn ($176m) to INR30bn in the financial year ending 31 March 2019 (FY2019), in order to maintain their current growth rate of 17-20% (on a modest profitability base), says ICRA, an investment Information and credit rating agency.
"Even as actual capital requirements will depend on the business mix, growth rates and claims experience, ICRA estimates that to maintain a solvency of 1.65 times (compared to the minimum requirement of 1.5 times) while growing at a CAGR of over 18-20% and maintaining similar claims records, the private sector players in the industry would require around INR12bn to INR30bn of equity capital over the next five years," said Mr Karthik Srinivasan, group head-financial sector ratings at ICRA.
Privately held non-life insurers saw their premiums grow by 22% in FY2018, faster than the 13% increase posted by government owned insurers, reports the news agency ANI citing ICRA.
Owing to the sizeable difference in growth rates, the share of private players in the market improved to 55% for FY2018 from 53% for FY2017. Overall gross direct premium in the non-life market reached INR1.507 trillion in FY2018.
Mr Srinivasan said, "We believe that private players will continue to display strong growth in motor, while health sector business (retail business) will continue its strong run in FY2019. Crop insurance growth for private players will continue but not as rapidly as in FY2016 and FY2017.”
The Indian general insurance market grew at a slower rate of 17% in FY2018 after robust growth of 32% in FY2017. The slowdown in business was evident in the fire/property segment, and motor OD segments. However, health and motor TPL bucked the trend, and public sector insurers grew rapidly in these segments.
ICRA expects state owned insurers to improve pricing in the motor OD segment, and to be more selective in the health segment in FY2019. This would result in slower growth but relatively improved underwriting profitability.