PPT made by Saurav Tibrewal, Varun Goel and Me for Reinsurance Business

1. King Of Kings
Team AMAZAAN

2. Global Reinsurance Industry
 Market size of $165 billion in 2009
 Reinsurance market took a hit in 2008 Market Share in 2009
in recession but is expected to again
surge to $ 199 billion by 2014
Munich
Reinsurance
Co.
Swiss
Global Reinsurance market Reinsurance
21%
Value (in bn $) Co.
Hannover
250 Rueckversicher
50% 13%
200 ung AG
150 Berkshire
Hathaway Re
100 8%
8%
50 Other
0
Source: Datamonitor
2005 2006 2007 2008 2009
Source: Datamonitor

3. Global Reinsurance Industry
 US got maximum hit
from recession in 2008
 Europe’s re insurance
Industry has still not
recovered to the extent of
its fall
 Asia’s industry is
showing a lot of growth
potential
Major Reinsurance markets:
 European countries –
Switzerland, Germany, Spain
 United States
 Bermuda
 Japan
 China
World Catastrophe Re Insurance Market 2008

4. Major Global players
Berkshire
Parameters Hannover Munich Re Swiss Re
Hathaway, Inc
$112,493 million in $14,287 million in
Revenues $74,936 $30709 million in 2009
2009 2009
Profit Margin 7.2% 7.1% 4.7% 1.9%
1. Munich Re offers a
General Re provides 1. Its non life
broad range of 1. It operates through a
property and reinsurance business
products, from network of more than
casualty insurance includes property
traditional 90 offices in over 25
and reinsurance, and casualty
reinsurance to countries, as well as
life/health business, financial
alternative risk through reinsurance
reinsurance and reinsurance and
financing. brokers
other reinsurance specialty business,
2. The group 2. The group's
intermediary and catastrophe business
Important reinsures the risks reinsurance products
risk management, 2. Through financial
considerations of oil rigs, satellites are complemented by
underwriting reinsurance, the
and natural insurance-based
management and group offers its
disasters, and the corporate finance
investment clients individually
risks arising from solutions and
management structured coverage
the use of genetic supplementary
services in 55 in order to stabilize
engineering and services for
citiesa cross the their profits and
information comprehensive risk
world so it has a protect their
technology. management.
very wide reach financial statements.

5. Insurance in India
Source: Annual report FY 2000-09, Insurance Development Regulatory Authority

6. Life Insurance Business in India
Gross Premiums
 Penetration of Life Insurance –
close to 3%
 Sharp fall in growth after
recession
 Private players are growing at a
faster pace
Major Players
LIC
ICICI Prudential
2.22 Bajaj Allianz
Emerging markets 2.06 SBI Life
2.51
like India have 3.25 HDFC Standard Life
exhibited a strong Birla Sun Life
Reliance
growth 4.79
Max New York
momentum, driven 6.92 Tata AIG
Aviva
by a robust OM Kotak Life
demand, consumpti 70.92 Metlife
on and savings rate – LIC is the ING Vysya
PWC Assocham major Shriram Life
Sahara
Report player Bharti AXA
IDBI Fortis Life

7. Non Life Insurance Business in India
Gross Premiums
 Non Life Insurance Business in
India is quite volatile in terms of
premiums
 Still it has registered a growth
of around 18% over the last 7
Income Projections by Goldman Sachs
years
Middle class (yearly income>$3000)
Major Players
120.00%
100.00%
80.00% ICICI-lombard
Bajaj Allianz
India is expected to
60.00% 13% 11%
India Reliance General
see higher growth in
40.00%
9%
IFFCO-Tokio
Insurance driven by
20.00%
14%
Tata-AIG
Royal Sundaram
the regulatory0.00% 6%
Cholamandalam
2005 2010 2025 2050
changes in the 5% HDFC ERGO General
industry and 14%
Future Generali
New 3%
underlying socio New India
India is 3% National
economic trends the 18% 1%
2%
United India
- KPMG Report major 1% Oriental
player

8. Current structure of Reinsurance Industry in India
Primary General Compulsory Cession Retrocession to
Insurance Companies to GIC Foreign Companies
 First General Insurance companies approach GIC Current situation of GIC Re In Indian Market
Re for Mandatory Cession of 10%
 Most companies get more than mandatory sum
reinsured through GIC Re instead of  Revenues of ` 719 crores in year 2009-2010.
approaching other smaller domestic players or  Almost monopoly like situation in General
foreign players with regulatory issues reinsurance market with 65 % market share
 GIC Re in turn have contracts with foreign  Mandatory cessions to GIC and its right of first
companies like Munich Re & Lloyd to share the refusal privilege
burden of Reinsurance risk
For the Indian financial year of 2008-09, the general insurance premium in India was
around $6bn. The domestic companies' retentions were approximately 70% and
ceded reinsurance premium was about 30% out of which 66.6% was with GIC Re.

9. GIC Re Business Composition
India Class wise Premium Foreign Class wise Premium
Salient Features
• Only one National Re Insurer - International & Domestic
Major Player
GIC GIC’s expansion Business composition
into foreign
• All Non Life Insurers has to markets helped it
compulsorily reinsure their
Domestic
Obligatory
business with GIC
to not only 38%
Re Insurance
depend on Foreign
62%
India’s insurers
• FDI of 49% has been proposed
FDI

10. Reinsurance Industry -SWOT ANALYSIS
Strength Weakness
Strength Weakness
 Vast Emerging economy with Dominated by State Owned
more than one billion people Insurers
 High Rate of Savings culminate The non-life penetration rate is
into Insurance Products among the lowest in the world
 Resilient against global  Lower spending Indian Population
slowdown
 Growth Rate of Insurance
in India close to 25%
Opportunities Threats
 Long Term Potential
Current Political Environment
 Wealthier Middle Class
Bureaucracy
Economic Forces will force
 Pricing wars once foreign
Government to relinquish
players come in
regulations
 Changing Government
 Insurance penetration in
Regulations
India – premium to GDP ratio
close to 2% while in developed
economies, it is 8-10%
10

11. Growth Drivers
Growth Drivers of Insurance Industry = Growth in Re Insurance Industry
Growing GDP – Higher Penetration Expected
Removal of Controlled Tariffs
Emergence of New Distribution Channels
Increasing Consumer Awareness
Increase International Trade

12. Growth Drivers
Growth Drivers of Insurance Industry = Growth in Re Insurance Industry
Growing GDP Removal of Controlled Tariffs
 Pension Sector Reforms  Government Reforms
 Rising Disposable  Increase in FDI limits
Incomes
Emergence of New Distribution
Channels
 Lower cost access to customers
 Ease of availability
Increasing Consumer
Awareness Increasing International Trade
 Higher Growth Rates  New trade finance products
 Innovative products  Demand for credit insurance

13. Growing GDP – Higher Penetration expected
Non-life 2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f

Nominal GDP, US$bn 799.7 934.6 1046.9 1326.4 1171.5 1327.9 1780.3 2085.7 2390.5 2721.6 Penetration
rate of Non
Penetration, % of GDP 0.61% 0.61% 0.67% 0.53% 0.47% 0.55% 0.62% 0.69% 0.90% 1.17%
Life
Density, US$ per Insurance
capita 4.38 5.12 6.15 6.11 4.73 6.11 9.17 11.87 17.43 25.41 sector is
going to
– EUR per capita 3.51 4.09 4.49 4.15 3.36 4.46 6.88 9.38 13.94 20.33 increase at a
Life rapid pace
Population, mn 1,106 1,122 1,138 1,154 1,170 1,187 1,203 1,219 1,235 1,251  As the per
Penetration, % of GDP 3.01% 3.70% 4.67% 3.67% 4.37% 4.05% 3.17% 2.83% 2.58% 2.37% capita
income in
Density, US$ per
India
capita 21.75 30.79 42.98 42.21 43.77 45.33 46.89 48.44 50 51.61 grow, the
– EUR per capita 17.40 24.63 31.37 28.7 31.08 33.09 35.16 38.27 40.00 41.29 Insurance
sector will be
Exchange rate benefited
US$/EUR 0.80 0.80 0.73 0.68 0.71 0.73 0.75 0.79 0.80 0.80 from the
same
INR/US$ 44.01 45.18 41.17 43.4 47.54 45 41.75 39.7 39.05 38.55

14. Favorable Government Regulations
“For the industry to grow in the future, it is imperative for the
government to look at enhancing the foreign direct
investment (FDI) limit to 49% from the present level of 26%
and also allow foreign reinsurance companies to set up
branch offices in India”
- IRDA Chairman J. Hari Narayanan

15. New Trends
Emergence of New Distribution Channels Launch of Innovative Products
Direct Selling
Agents General
Health
ULIPs Insurance
Insurance
Products
Agents such as • New Products • Innovative • Family Type
NGOs in rural Brokers have attracted products in Insurance
areas customers Fire, Hull, Mot cover etc. can
or etc, are be covered
launched with
various riders
Corporate
Online
Agents such as
Distribution
NBFCs
Use of Information Technology Tap the growing Market
Online Distribution of Insurance Products  Growing Automobile Sector in India
Back End Support  Thrust in Micro Insurance and health
Customer Support Insurance
Feed back  Growing Logistics Industry In India

16. Challenges faced by Re Insurance Industry
• Wide difference between the rates Premium rates in India range
required by the international between .18%- .25% in
Difference in reinsurers and those charged by comparison to .3%-.5% in
Rates the domestic insurers leading to foreign markets
the price affordability as an issue
Ceded Business usually
in range of 30%-40%
• It has depended mainly on the
Low domestic market understanding
out of which a major
portion (2/3rd) is
Competitive and basing probability of business ceded to GIC Re
ceded rather than on underwriting
Environment and risk information criteria
• Country regulators face challenges • Computerization of
in policy formulation for creating a administration and
Policy market that develops and keeps settlement of accounts
confidence of the industry and for in respect of all inter-
Formulations keeping international trade company transactions
regulation intact. • Redesigning and
revamping various
insurance products
and processes is taking
place

17. Emerging Risks
Economic Environmental Technological Societal
Critical
Rising Oil Global
Information Diseases
Prices Warming
Infrastructure
Currency Nano
Earthquake
Wars Technology
Demographic Storms and
Shift Floods

18. Risk Measurement – ROL Index
 Declines of 10
and 6 percent in
2007 and 08
respectively
 Recovery of
6% in 2009, still
not recovered
fully
Source: Guy Carpenter & Co. LLC
Impact of Risk
Insured losses of 13.9 billion USD from hurricanes Gustav and Ike
 Shareholders’ equity fell 18 percent

19. Reasons for lack of foreign insurers in Indian market
Minimum High
Rating Retention
Rate
Compulsory 10% cession to GIC Re &
Inadequate cession maximum of 10% cession to a
Rates foreign player reduces
opportunity for foreign players
 Global reinsurers feel that rates for reinsurance products are inadequate and not at all
reflective of global market conditions.
 The regulations also require that any reinsurer used must have a minimum rating of BBB
from Standard & Poor’s, or a similar international rating organization.
 Compulsory cession in India – 10% cession of the loans have to be offered to GIC Re
before it can be offered to other reinsurers
 Cessions to any one foreign reinsurer may not exceed 10% of total overseas cessions.
 As a result of the policy to maximize national retention most of the premium is tried to
be retained in India leading to overall retention rate of 70 %

20. FDI Destinations
World's Most Attractive Locations
China
10 6
7 7 India is the
52 India second most
11 favorable
12 United States destination
in the world
22 for FDI in Re
Russia
41 Insurance
Sector
36 Brazil
Source: UNCTAD 2009
FDI Plans by Foreign Affiliates in host
countries for 2007-2009 41 % of the
r
45 respondents
40
e 35 are bullish
s
%
p
30
25
about the
t
o
o
s
20 increasing
n 15
f
d 10
FDI
e 5 investments
n 0
Reduce Reduce Stay the Increase Increase
all over the
Considerably Somewhat same somewhat Considerably world

21. Benefit of Increasing FDI Limit
High Risk Pooling
Min. Reinsurance Wider among
Investment Rate due to Market existing
requirement decreased Reach players
rates
 FDI limit proposed to increase from 26% to 49%
 May increase chances of Foreign players entering Indian Market but most of issues
still unsolved
 Joint venture still required with domestic partner needed to invest in $23 million
(51% of $45 million)
 Cessions to GIC as well as regulation of not more than 10 % to a single foreign
Insurer still there
 Better solution is to allow Branching of Foreign Reinsurers. Its benefits are:
o low-frequency, high-severity events can have the full financial backing of the parent
companies.
o With a fully-owned subsidiary, the parent company will not be liable for the risk of the
creditors. So, Only way to protect against the risk is to allow for branching of reinsurers

22. Foreign Investors in India
Benefits of opening up Barriers with regards to Foreign
Reinsurance sector for foreign Reinsurers in India
Investors
 Additional capital available to cover  Effective prohibition on cessions
risk of projects with large capital abroad. Insurance law makes it
 Relieving Indian insurers of partial or mandatory to place the business
entire risks that are too large for their within India before reinsurance can
own capital base be taken out with foreign reinsurers.
 The presence of international  Only allowed to set up
reinsurers will transfer international representative offices but not
know-how to the local market and operational offices under Indian Law
provide Indian insurers with proven
international expertise in assessing
complex risks and handling
large, complex claims.

23. Implications of more foreign Players for GIC Re
FINANCE
MARKETING
 Heavy capital flow in the industry
 Foreign Tie Up can be fruitful for GIC as
 More competition may ask for
additional capital can be used to improve
aggressive B2B marketing strategies
distribution systems, IT, better commissions
 More Commissions may to be
 It may also lead to Price Wars and the Re
shelved off
Insurance rates (already low in the Indian
 Profit margins may decrease as
market) may further plummet down
overhead expenses will rise
KNOWLEDGE
TECHNOLOGY
 At present, the actuarial knowledge
 Improved Technology can be gained
in India is below the global standards
through mutual transfer if GIC partners
 Global players will bring that part
with a global player
along
 Improved technology means
 Better actuarial valuations will imply
increased efficiency which in turn will
correct estimation of premiums and
give higher profits
underwriting gains/losses

24. Success story of Munich Re
• Reduced dependency on the stock market fluctuations
Hedging
• maximizing value added, managing underwriting profitability to at
least 15% return on risk adjusted capital and achieving a combined
ratio of 97% over the cycle
• Cycle management strategies include unbiased valuation of risk and
Active Cycle price (deviation from underwriting guidelines requires
dispensation), leveraging competitive position, develop less cyclical
Management segments and canceling unprofitable business
• Munich Re is developing new insurance products that will address
exposures against cyclicality, supply chain, reputation, political
risks, emission trading, residual value, weather, pandemic, and business
Innovation interruption caused by other than direct physical loss

25. Qualities that a Reinsurer should have
Qualities in a reinsurer
Risk Management practices others
Additional services offered
Local presence
Consistency of strategy
People
Consistency of risk appetite
Technical knowledge
Continuity of offer through the market…
Financial strength
0.00% 20.00% 40.00% 60.00% 80.00%

26. GIC Re- Key Success Factors
KEY Success Factors to be Remarks Attractive
managed ness
Strong Product - The product portfolio is
Portfolio diversified
5
- Need to have more of voluntary
rendition than mandated
Limited Business - For Existing customers & New
Products/ Development customers both Domestic and 4
Services Foreign
Limited Product - Investments in Actuarial
4
Development Development
Insurance - Scope of Insurance across
Development various verticals in India
4 4.3 Distribution
Distribution / Small Clusters Across - Setting up more branch Offices for reach
5
Sales Industry across the country
Strong TIE
Key Partnerships - Forging relationship partnerships Ups
to increase the market 4
Export
Expansion in Market
Attractive New Access
Investment in Verticals
Long Run Strong
Market 26
Potential

27. Identifying Strategies for GIC Re
Current Strategy New Initiatives suggested
• Overseas Expansion Policy- 44% share in its • Enter Expertise Reinsurance which is the
total business expected to Reach 50% by the growing segment in Indian insurance market
end of 2012 with foreign companies like Hiscox entering
the market
• Looking to become a major Reinsurer in Afro
Asian Market by acquiring other smaller firms • Improve top broker relationships through out
the world by Senior level global and regional
• Planning to set up a $500 million pool for summits, identifying and overseeing execution
natural catastrophes in Asia and Africa of joint strategic growth and service initiatives
• Expanding its international footprint by • Can enter into two way agreements with major
opening offices in Brazil, Malaysia and South reinsurers who are looking for entry in Indian
Africa. Currently, the corporation has branch market to enter into growing Eastern Europe
offices in London, Dubai and Moscow and latin American markets
• Tie up with Hannover Inc in 2008 under which • Innovative products like ILS (insurance linked
the two organisations will work for joint strategies) are the need in world market due to
development, marketing and underwriting of falling interest rates and excess capital
life reinsurance business in India

28. Model for Identifying key drivers
Quadrant 1:
Accident HIGH GROWTH /
Property and Marine HIGH VOLUME
Health Liability
Professional Quadrant 2:
Indemnity Low GROWTH / high
VOLUME
2 Auto 1
Industry
4 3 Quadrant 3:
Cement
High GROWTH / low
Aviation Micro VOLUME
Insurance
Quadrant4:
Low GROWTH / low
VOLUME
Source of the model: Lloyds Report

29. Strategy relating to maintain market share
USPs of GIC
Expertise
to do Re
• Tap on High Growth High Business Industries
Insurance
business in
Industry • MOU can be signed between GIC and insurers who are the
market leaders of insurance of HGHV business
India Specific
General Insurance Corporation • Micro Insurance sector is still under developed, with huge
potential. Special emphasis can be laid on that.
(GIC Re), the state-owned
national reinsurance
Compulsory
company, has acquired the
cessation by
distinction of being the only • Partnerships can be made with foreign insurers in specific
non life areas similar to the one which is existing with Hannover Re
reinsurer among significant
insurers Partnerships
players worldwide to report
• Partnerships with insurers in India should be undertaken. GIC
has a strong distribution network that can be leveraged upon
profits in `08-09. and alliances can be made.
High -- Economic Times
Profits,
thus capital
availability Additional
and set • Additional Investments has to be made to do aggressive
Network Investments marketing, improve distribution systems etc.

30. Identifying Strategies for GIC Re
Micro-Insurance sector in India
Industry Factors Growth Drivers
• ` 80 billion market • Integrating the micro-insurance with the poverty
• Insurance penetration of 4% only alleviation programmers of various state governments.
• 78% population still does not have • Development of rural health insurance regulations and
access to Insurance products & services growing awareness
• Major players are NABARD, SKS • As demand for micro insurance grows considerably,
microfinance, ICICI prudential life micro insurers will need reinsurance to increase
insurance, Bajaj Allianz and LIC along capacity and meet financial and regulatory
with many NGOs requirements.
• Major concentration in south India • Helps minimizing the effect of abnormal attritional or
owing to growing availability of micro catastrophic losses, which could threaten a micro
insurance in the region insurer's financial stability.
Strategy to be adopted
• GIC can partner with LIC to distribute their micro-insurance products as well
• Low value products given to people with weak credit standing they are more susceptible to
credit risk & offers a huge market for Reinsurance business
• Can leverage its knowledge and experience from developed markets for guidance in
establishing proper administration of the products of micro insurer

31. Identifying Strategies for GIC Re
Health Insurance sector in India
Industry Factors
• Total Expenditure on health in India is Market size (Rs Crores)
nearly 6% of the entire GDP 8000
• Government spending is less than 25%
against the average spending of 30-40
6000
% in other developing countries. 4000
• Indian health insurance industry
2000
stands at INR 5,125 crores with only a
small Section of the total population 0
(around 2%) being covered so far.
• CAGR of around 35 %
Key Issues Reinsurance & strategy to be adopted
• Limited Influence over healthcare • Penetration of reinsurance increased over the
delivery mechanism years to high claim ratio in Indian market
• High claim ratio • Foreign players such as Munich Re planning to
• Low level of consumer awareness venture into this business
• Limited product development • High premium rates demanded by foreign players
• Reinsurers face biggest challenge of due to high risk so GIC Re command market share
limited data availability with low prices
• Tie ups with national Insurers like LIC etc

32. E business in Reinsurance
• Huge potential for streamlining processes in facultative coverage like
underwriting, contract and claims management
• Different electronic transaction stages creates additional value for
customers and generates a competitive advantage for the company
• On-line purchase of insurance is on the rise and premium payment
through mobile phones is now possible.
Development if E Business in facultative reinsurance

33. Action Plan
Operations FY1 FY 2
• Increase in Branch Network • Smoothening of the entire process
• Reaching out to forge key delivery • Quality Certifications to increase
Operations mechanism ratings and Foreign Entities comfort
level
•Product development and increased • Launch of innovative products for
knowledge sharing with other Micro inclusion for burgeoning African
Product
developed foreign companies Market
• Competitive rates
•Raising capital for expansion in Branch • Actuarial learning expenses
Finance Networks
• B2B Marketing Initiatives • Educating people about Insurance
• Setting up Key Point of Contacts (KPC) and tie up to increase the growth of
Marketing / with companies to increase customer Industry
Communication service
• Training for development of skills for • Recruitment of employees for new
employees branches
HR
• Training of Employees for the
Regulatory Compliances 33

34. References
• www.thehindubusinessline.com
• www.livemint.com
• www.irda.org
• data monitor reports
• ESIC Database
• economictimes.indiatimes.com
• Annual report of GIC
• GI Re News
• Insurance Law Regulations in India by Nishith Desai Associates
• Hannover Re Report
• Societies of Actuaries Report
• US Reinsurance Regulation report
• Paper on Indian Insurance Industry by Institute of Insurance and Risk
Management
• Potential and Prospects of Micro Insurance in India; UNDP ,Regional Centre
of Human Development Unit 2009,
• Mckinsey Report on Health Insurance in India
34