Insurance sector to see strong growth on robust GDP

Moody’s Investors Service Tuesday said India’s insurance and reinsurance sectors will increase strongly driven by strong economic growth and evolving regulatory regime. It said robust GDP expansion, coupled with present low insurance penetration, should support double-digit growth for the non-life sector over the next 3-4 years.

In fiscal 2018, total gross premiums for the non-life and life insurance sectors grew 11.5 percent to Rs 6.1 lakh crore (USD 94 billion), bringing the 5-year compound annual growth rate (CAGR) to 11 percent.

“India’s strong economy and evolving regulatory regime continue to help growth for its insurance and reinsurance sectors,” Moody’s said in a report titled Insurance – India: Continued regulatory evolution is credit positive for India’s insurance sector.

Moody’s stated it expects India’s real GDP to expand by 7.4 percent and 7.3 percent in fiscal 2019 and 2020, making the Indian economy one of the world’s fastest-growing.

“The Insurance Regulatory and Development Authority of India (IRDAI) is proactively introducing regulations that will help insurers’ balance sheets and improve their access to capital, a credit positive,” Moody’s Assistant VP and Analyst Mohammed Londe said.

Liberalization of the reinsurance sector – with the admission of foreign reinsurers since 2017 and IRDAI’s steps to ensure that they can accomplish with incumbents – will specifically advantage the non-life sector. Regulatory reforms will also improve the sector’s capital strength, Moody’s said.

In 2015, IRDAI increased the ceiling on foreign ownership of Indian insurers to 49 percent from 26 percent, encouraging global players to buy holdings in local entities.

Besides, the government’s set up of a new program in 2018 to provide health insurance for 100 million families is credit positive as it will help grow health premiums and provide insurers with cross-selling opportunities, it noted.


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