GIC Re: Committed to the market

What do you think cedants are looking for in today’s markets?

With increasing commoditization of product offering, ample capacity and capacity chasing business, insurers are in a good position to seek value addition from reinsurers. The value addition in terms of product innovation, pricing new products, advisory on reinsurance purchase and risk assessment support will continue to be demanded by the clients.

What differentiates your approach to reinsurance?

GIC Re has a very strong position in the domestic market. With our market share of over 60% in the domestic market and relationships built with clients over the last over four decades with continued support across all classes, we have been able to sustain our competitive position. We have now scaled two ranks and are now the 10th largest global reinsurer, thus providing sizable reinsurance capacity to client programmes. We are more client focused and more committed to the markets that we are writing from. GIC Re has tended to be more accommodative to client needs. This provides clients more comfort in business dealings with us.

Which lines of business do you see increasing demand in?

This would depend on regions and countries with their peculiarities. However, in our part of the Afro-Asian region, the demand will be mostly from motor, health and property. The growth of specialty lines is remarkable in some pockets but is usually on a smaller base.

Are there specific geographic areas you see opportunities in?

We have during last couple of decades increased our global presence by way of setting up branches in London, Dubai and Kuala Lumpur. We have a subsidiary in South Africa and a liaison office in Moscow. We are in the process of upgrading our operations in Moscow to a subsidiary operation and see a significant opportunity in Russia and Former Soviet Union States. With our Lloyd’s Syndicate 1947 being operational from April 2018, we hope to improve our access to global business with good credit rating. We see that USA is a major market and we are already writing business from there. We will be able to increase our book from there. We will continue to be focused on increasing our market share in AfroAsian region while spreading our wings in the developed markets.

What do you think will be the major developments in the next renewal season?

We think the trend during last few years is that the market is becoming more segmented in terms of pricing trends and risk assessment as against somewhat more broad-based trends in earlier years. This reflects the growing sophistication of the buyers and greater risk analysis that goes into understanding the risks. With most buffers available like reserve releases now exhausted, alternative capital continuing to play significant role and expectations of the market looking for rate increases being largely belied, the market is at an interesting point. But one could possibly expect any softening trends will be unsustainable.

A lot of people are saying Insurtech will change the market. What are your views?

Innovations not only create disruption, it also creates surprises. Thus, insurtech will have influence and impact which cannot be entirely foreseen. Most of the impact will be in the way insurance is sold and thus influencing the distribution models. Apart from this, another area of impact will be how the data is being captured and funneled into risk assessment and underwriting. At the same time, in some way, possibly the impact is overhyped. To the extent, it will throw up surprises and new applications, we are yet to come to grips with its implications. The most important thing to watch will be whether it helps promote penetration and bridge the protection gap.

Do you see the current wave of M&A continuing?

In recent times, we have witnessed that Mergers and acquisitions is on the rise. We believe this will continue to entice managements to seek ways to extract value when margins are increasingly under pressure owing to persistent competition, particularly in the context of 2017 record catastrophe losses and scope for reserve releases is exhausted. As long as the business case can be made for synergy and economies of scale, M&A will continue to appeal to management to test this avenue. For risk carrier business where balance sheet size matters and merging of risk portfolio could possibly provide more diversification either in terms of geographical spread, line of business spread, broader market access or even insurance and reinsurance books, there can be economic merit in pursuing this path. Any M&A activity based on this will reduce volatility, optimize protection cost and provide resilience. However, any risk accumulation arising from such activity will be a strong disincentive. Getting thus the right fit is quite important.