Global Reinsurance Companies Have Arrived In India. Will They Succeed?

Global reinsurance companies have arrived in India. But high tax rates and regulatory complexities may hobble their prospects.

- Kanishka Gupta

February 1, 2017 was a crucial day for Indian insurance: the day foreign reinsurance companies, for the first time, opened branch offices in Mumbai. It was the culmination of a process which began with the passing of the Insurance Laws (Amendment) Bill in March 2015, the same one which raised the cap on foreign insurers’ participation in joint ventures with Indian companies from 26 per cent to 49 per cent. Among its other clauses, it also permitted foreign reinsurers to set up wholly-owned branches in India. Though foreign insurance companies have been in India since 2000 – in joint ventures, with a cap of 26 per cent equity – there were no reinsurance companies among them. The sole Indian reinsurer so far was the publicly owned General Insurance Corporation (GIC Re).

GIC Re, with a turnover of ₹18,435 crore in 2015/16, handles around 52 per cent of the total reinsurance business in the country. The rest is already spread across global reinsurers, but with many of them now expected to set up branches in India, the business is likely to get a big fillip. Following the amendment, the Insurance Regulatory and Development Authority of India (IRDAI), in October 2015, released guidelines on the registration and operation of foreign reinsurers in India – conditions they would have to satisfy to qualify for certification, followed by a three-stage clearance process they would have to undergo. IRDAI has since come out with a number of further clarifications and guidelines.